The CBI said that the Government needed to cut its planned spending by £120 billion over the next six years, amid forecasts that official figures due tomorrow will show that total net borrowing has surged by another £10 billion in the past month.

The true level of Government debt is equivalent to 157 per cent of national output and nearly three times as large as the £805 billion figure reported by the Office for National Statistics, according to a new book published by a centre-right think tank.

Brooks Newmark, the Conservative MP for Braintree, Essex, says in The Hidden Bombshell, published today by the Centre for Policy Studies, that government debt is actually £2,200 billion. In the book, Mr Newmark argues that the UK’s public sector net debt is equivalent to £85,610 per household and in the last year has risen by £346 billion – or by £11,000 a second.

Mr Newmark arrives at his figure by saying that official numbers do not take into account the full cost of projects financed through the private finance initiative (PFI), which by his calculation adds £139 billion to the public debt. “A major attraction of PFI is that, in theory, it transfers the risk of failure of a project from the Government to the private sector. However, in reality, the Government carries most of the risk … £139 billion is a cautious figure as it does not include local PFI projects, some of which may fail,” Mr Newmark says.

Unfunded public sector pension liabilities, which the Government will need to pay, are also omitted and add a further £1,104 billion. Contingent liabilities, such as Network Rail, add another £22 billion. Finally, the £130 billion cost of recent interventions in the financial sector needs to be factored in – bringing the total “hidden liabilities” to £1,395 billion and the total debt to £2,200 billion.

The UK’s latest public finance figures are expected to show that net borrowing increased by £10.4 billion in September, taking cumulative net borrowing for the year to £80 billion.

The CBI called on the Chancellor to ensure that his Pre-Budget Report includes a credible plan for balancing the public finances by 2015-16, two years earlier than set out in the March Budget, in an attempt to boost investor confidence and improve Britain’s economic prospects.

The CBI said the Government will need to reduce its spending by a total of £120 billion between now and then to balance its books. About £50 billion of these savings will need to be made between now and 2013 to allow for a slower economic recovery than the Government is predicting, with a further £70 billion needed after 2013.

John Cridland, the CBI’s deputy director-general, said: “We are facing the biggest peacetime deficit in our history and it is not simply going to disappear with the economic recovery. That is why we need a credible plan to convince financial markets and taxpayers alike that public finances will be restored to health.

“Just as families and businesses are tightening their belts up and down the country, the Government must decide what it can afford to deliver.”

Source: http://business.timesonline.co.uk/tol/business/economics/article6880228.ece

If you missed Part 2 The Bailout click here

Prime Minister Brown and President Obama are doing precisely that with their rescue packages, though they think they have gone beyond that by discussing new regulatory frameworks. That, however, is only what should have been there in the first place, and might have been so, were it not for the Thatcher/Reagan free market folly. I am amazed that she/he did not know that powerful greedy people will take advantage of any loophole, relatively speaking, or is that a jibe to close to home in her case? New regulations do not change a rotten system; they perpetuate it.

The next generation of Madoffs and Goodwins will find their way round any new regulations legally or illegally, and other banks will provide the secret services that Swiss banks have now been reluctantly obliged to curtail. People will continue to overlend so that others can overspend, and economic and land policies will continue to concentrate wealth in fewer hands and foster further social injustice and unrest. The inevitable result in quick time will be even greater crises; that is until we are forced to restructure the whole global trading system. The longer we delay making the inevitable fundamental change, the harder and more painful the process will be. At least this generation of politicians will be off the hook, which seems to be all they care about anyway.

So what might a whole system perspective reveal? It takes no more than an early glance to see that capitalism, as we know it, has no long term future as a stable structure for the fair and equitable existence of all of life on this planet. This is so for as long as the level of human consciousness fails to evolve beyond where it is today. Ultimately conscious is more significant than systems, and a variety of systems could be made to work.

• Clearly Adam Smith’s founding principle of capitalism that, “The trickledown theory will take care of the less well off” was plain wrong. Despite all the economic growth in the past two hundred years and the vast wealth accumulated by some, the gap between the rich and the poor is now widening at an ever increasing rate. The description by US economist J. K. Galbraith was more apposite, “If one feeds a horse enough oats, some will pass through it onto the road for the sparrows.”

• Economic growth, an essential tenet of capitalism, demands ever more production and consumption of energy and resources which we simply do not have – and more emissions that we don’t need. Despite all the efforts today to use renewables to meet our needs, and new fuels and ideas in the pipeline, only massive cutbacks in consumption will save us in time. To promote growth and consumerism to save the economy at this time is counter productive, short sighted and irresponsible, but that is precisely what our politicians are doing.

• Capitalism, especially the Thatcher/Reagan version, glorifies the success of the individual at the expense of the collective. That expense goes far beyond merely increasing the rich/poor divide to create a catalogue of social problems from obesity to teenage pregnancy and produces diagnosable emotional distress. (The Selfish Capitalist by Oliver James 2008, Published by Vermillion)

• Another failure of capitalism is the social impact of land ownership. It concentrates land and wealth in the hands of the few and severely constrains future generations. We need to see ourselves as stewards of the land that we tend for future generations, and we need to pay for the right to use it, but not own it. “People cannot own mother earth, they just think they do. If we don’t care for it, our mother may reclaim it at a cost.”

• Capitalism is a system that, by its very nature, invites people to seek competitive advantage for gain, which in turn encourages people to sail close to the wind, in other words to bend or break the rules. We have enough hardened rule breakers not to have a system that causes other ordinarily naturally honourable people to see no option but to join that club and play that game.

Capitalism is a system designed and modified occasionally by and for people at the level of consciousness that prevails at the time. The creators may be a step ahead of the average consciousness and the followers a step behind, but the system will nevertheless reflect the collective group think. The group think of capitalism was for competitive individual material gain, something akin to what we see in adolescents trying to make their mark in life.

Capitalism gained traction as the industrial revolution took hold and the new found coal and oil provided the opportunity for great feats of engineering in the form of steel and steam ships, bridges, railways and later cars and aeroplanes, and now it is electronics. It also created wealth and lifted many out of poverty. We became enamoured with knowledge and technology, and the belief grew that we could engineer our way to Utopia. This in turned skewed our education towards the quantitative away from the qualitative, towards knowledge rather than wisdom and towards outer riches rather than the riches that lie within.

Materialism took hold, but without the wisdom to use our technology wisely, within 200 years we had taken humanity to the brink of self-destruction through a lack of vision and wisdom, and through over consumption in the illusion that more stuff will make us happy. Meanwhile we in the industrialised countries having plundered the resources from the less “developed” world, we left them behind in poverty, yes, one third of the world’s population. Where is the wisdom it that? For many it may not have been the intention of capitalism, but that has been its effect, and now it is in trouble with only ourselves, our bankers and our politicians to blame.

The riches that lie within, and the wisdom referred to in these two paragraphs, could and should have been ours along the journey of evolving consciousness, except that we failed to foster and later even recognise that journey in our rush for other things that we deemed more important and now we have the consequences. Our whole educational purpose is skewed by the perceived needs of capitalism. We educate our children to be good consumers rather than to be wise or self-responsible.

When the human evolutionary process goes too far off track in one direction, in the end it will hit the guard rails. Those guard rail collisions are lined up before us, and setting aside several earlier ones from futile wars to unnatural disasters, we have now met the economic one. The environmental one that is far more consequential awaits us if we don’t wake up fast, and to a considerable extent even if we do. Fortunately there is a new groundswell of conscious people arising all over the world who see through the transparent folly of unconscious political and corporate leaders who are acting out of fear, and as I suggested before, behaving at an adolescent level of consciousness. As Albert Einstein reminds us “We will never solve the problems at the same level of consciousness that created them in the first place.” (Blessed Unrest by Paul Hawken 2007 Published by Viking)

Hope lies not in our current leadership, but within ourselves along with all those humble but wise people who are awakening from the illusion of the consumerist dream, and can envision a better world, one that is back on the psychosocial evolutionary track. The task of divesting the power from those politicians and corporations that are driven by growth, greed, fear and self-interest is not easy task. The challenges we face are huge, but evolution is on our side and we have vision and wisdom, something that they lack. That is apparent. We may have to use methods that seem a little distasteful at times, such is the planetary urgency. I compliment Leila Deen for dishing out green custard to Lord Mandleson, though that may not have been distasteful enough.