Over the last few weeks, many parallels have been drawn between the Chancellor of the Exchequers Budget position and previous occasions when there has been a black hole in public finances such as 1976, 1981 and 1992. However, the combination of problems facing the current Chancellor of the Exchequer is probably unique.
The starting point is that official government borrowing, which excludes a number of important items, will rise to at least 12% of GDP over the next year or so. The last time government borrowing was threateningly high was in 1993 when it peaked at around 8% of national income. Norman Lamont was in a tight squeeze in the 1992 Budget but the problems facing Alistair Darling are much worse. The 1992 deficit was mainly recession-induced and closed as the economy recovered, whereas about half of the deficit today is structural and will not go away when the recession ends. If we include public sector pension costs, properly calculated, the structural budget deficit today is probably about 10% of national income.
In 1981, Geoffrey Howe was facing a particularly grim combination of circumstances. Like today, government borrowing was not just due to recession but caused by general government overspending. The government was also finding it increasingly difficult to sell bonds to fund its de