The Deficit - the truth - the horrible truth

The Labour party's most senior figures, in defiance of their education and intelligence, keep claiming that Chancellor Osborne's actions are "driven by ideology, rather than necessity". This is absurd. Anyone who argues that rapidly addressing the fiscal catastrophe Labour left behind is anything other than absolutely crucial either knows nothing about global bond markets, or is so blindly ambitious, so determined to close their eyes to the facts, as to be unfit for public office.

The UK's fiscal crisis is of monumental historic importance. The future of the free world may not be at stake as it was in Churchill's day. What is in the balance, though, is the prosperity of the British people for at least the next few decades and our status as a top-ranking nation.

Just before the Budget, we learnt that government borrowing jumped to £11.8bn in February 2011, up from £9.5bn during the same month the year before. This was the highest February borrowing total on record, double consensus estimates. As a result, official public sector debt now stands at £876bn, compared with £729bn at the same time in 2010.

Over the last 12 months, then, this country's "on-balance-sheet" liabilities have risen by £147bn. That's roughly what we spent on the NHS and defence combined in 2010 – and that was merely, during this last year of "austerity", the incremental increase in what Britain has put "on tick".

That's the point – and we should keep making it until it fully enters the public discourse. It is the total debt numbers that Osborne, the Tories and our politicians in general should focus on, not the size of the annual deficit.

The deficit is merely the yearly rise in the borrowing total that we need to service. By 2015, when the deficit is supposed to drop to zero, it doesn't mean that all outstanding debt will have gone away. It means, on the contrary, that total debt will have peaked.

What matters to the finances of any household is the size of the outstanding mortgage, the on-going costs of financing that mortgage, and the prospects of paying it off. Only an economically illiterate fool would claim the family finances will soon be "under-control" because sacrifices will be made and lifestyles reined-in to such an extent that, hopefully, if everything goes to plan, having re-mortgaged every year between now and 2015, that family will then enjoy a single year in which it won't need to re-mortgage.

In 2009, the UK spent £31bn – around 6pc of total tax receipts – on debt interest payments. That's money down the drain. By 2015, we won't have reached, in Churchill's words, some "broad sunlit upland". After four more years of deficits, debt services costs, according to last week's Budget, will by then be £67bn a year – or almost 10pc of total tax receipts. These shocking numbers are also likely to be under-estimates, given the UK's massive "off-balance-sheet" liabilities and the Treasury's benign assumption of future gilt rates.

Public Sector Pension Scandal

Economist Michael Johnson has warned that public sector pensions have become a ‘Madoff-style pyramid’.

In a report for the Centre for Policy Studies Johnson said public sector pensions were ‘collapsing under the weight of insufficient contributions, rising longevity and an ageing workforce’.

He said ‘self-sufficiency is the key’ and unless the issue was addressed Britain faces a ‘societal division’ between private pensions and the ‘disproportionately high pensions paid to high earners’ in the public sector.

Over three quarters of civil servants are in a final salary scheme compared with less than 20% of private sector workers. Currently taxpayers provide around 80% of all public sector final salary contributions and in 2009 the state paid £14.9 billion towards the £19.3 billion costs of the UK’s four largest civil service schemes.

Johnson predicted that in 2016 the taxpayer will have to contribute even more to make up the £10.3 billion shortfall in contributions.

He said the government should start closing final salary schemes in favour of defined contribution schemes. In order to phase this transition in Johnson recommended one of two paths; a ‘brave’ path or ‘cautious’ path.

The brave path would be a ‘watered-down [salary-based scheme] before the introduction of a pure defined contribution framework perhaps in 2020’ or a more cautious path of a career average scheme up to a salary cap of £38,000 with defined contributions above that.

Wind Farms - A load of Hot Air??

There is a direct correlation between a lack of wind and cold weather. According to the Met Office, last month was the coldest December since records began a century ago. Last year as a whole was the coldest for 14 years.

On the coldest days of last month, when the need for power was at its greatest, there was virtually no wind, Britain's 3500 wind turbines were largely idle and almost no electricity was generated by them.

At 5.30pm on December 7, which National Grid says was the moment of the fourth-highest demand ever recorded in British history, wind contributed just 0.4 per cent of the country's electricity needs. The generation system coped – but it includes large numbers of old power stations that will soon be closing. In the future, under the far more wind-based system the Government wants to see, such levels of demand could turn out the lights.

"If, as government plans, we place too much reliance on wind, the electricity system will come under considerable stress, with very high prices, and even unscheduled interruptions, blackouts in the layman's terms,"

To avoid power cuts if the Government does go ahead with a mass wind-turbine programme, it will also need to build large numbers of new coal, oil or nuclear power stations for backup when the wind is not blowing. The cost of providing so much duplicate capacity is expected to dramatically increase electricity prices, with potentially serious effects on consumers and the economy.

Taxpayers' support for the wind industry itself would also rise, as private investors nervous about the lack of wind lose interest in the sector. Wind turbine manufacture has recently slumped and factories have been closed as demand has fallen, prompting calls for more public subsidy.

RenewableUK, the industry lobby body, insisted in response to our figures that the amount of electricity produced by wind had risen by a third in the last year and that electricity generated from renewables was at a "historic high." This, however, is because an increase in the number of wind turbines in operation, and not because of an increase in the amount of win