National Statistics Office latest (revised) UK current account data for the EU and the Rest of the World (ROW) has recently been released.  These give:

These colossal external deficits are now bigger than 2014’s internal (fiscal) deficit, about which we hear so much.  Yet the British government, and many economists, keep boasting about a successful economy, when no significant structural changes have been made, six years from the deepest recession in modern history.

Official Reaction to the Current Account Deficit

The largest reaction has been to increase it.  Earlier this year, the House of Commons and their allies in the House of Lords passed into law a requirement that 0.7% of Britain’s GDP should be spent on “foreign aid” or rather on “aid agencies”, a vast collection of bodies ranging from assorted UN and EU agencies, “International Development” institutes and departments in the UK and its universities, down to a small percentage spent with the Crown Agents who actually render practical assistance to poor people in impoverished lands[1].

The figure of 0.7% of Britain’s 2014 GDP is about £12.5 billion – a sum so big that the Department for International Development (DfID), set up by Tony Blair in 1997, struggles to spend it.  This at a time when the Armed Forces had their Nimrod 4A maritime surveillance programme shut down by Blair’s successor, David Cameron[2], so that the UK was put in the demeaning position of having to ask Canadian, American and French forces to track Russian aircraft and submarines “testing” UK air and sea defences in 2014, and relied on them during Cameron’s little bombing war on Libya in 2011[3].

Financing the Current Account Deficit

When the goods trade balance went into deficit in 1982 and then continued on down almost out of sight under the Thatcher government to £18 billion in 1990, the government and Treasury officials comforted themselves that the net income from services and overseas investment would compensate.  To a degree and for a time they did, but today, as was foreseeable, they do not[4].

These huge sums in the table are being paid for by capital transfers, i.e. asset sales, for example the purchase of shares in British companies by US, Canadians, Chinese, Kuwaiti fund managers[5] and UK property sales – particularly to Russian oligarchs and oil rich Middle Easterners who are partial to Central London and great country estates.

But neither a country nor an individual can go on like this for ever.  Within a measurable time, there will be no assets of this kind left to sell and this appalling Rake’s progress will come to an end.

Means of reversing the Rake’s Progress: Potash Potential in North Yorkshire

Foreign trade (exports) in 2011 has been computed by the World Trade Organisation[6] as $22,000 billion, of which 82% was merchandise (of which 52% manufactures) and 18% commercial services( of which 9% was travel and transport; most of the other 9% was construction and communications).

Thirty percent of the 82% making up merchandise is for mining and oil.  Given the dire figures in the table and the 60% decline in North Sea Oil output since 2002, most rational people would expect the UK government to jump at any chance to mine a product which is eminently saleable abroad.  Such is the prospect offered by a private company, Sirius Minerals, with its proposal to spend £1.5 billion on building a mine in North Yorkshire to extract 2.7 billion tonnes of potash – a basic ingredient in agricultural fertiliser particularly needed to bring marginal or unused land into beneficial food production elsewhere in the world.  The gains to the UK balance of payments when fully operational would be about £1.5billion per annum from about 13 million tonnes mined annually, comparable with the biggest mines in Canada and Russia.  Twenty thousand jobs would be created by the mine, the tunnel transport and intermediate storage and at the nearby export port of Wilton on Teesside.

Planners at the North Yorkshire National Park

These people who have no apparent expertise or interest in Britain’s desperate need to export, have delivered a two hundred plus page turning down the project on the vague grounds that it would compromise the character of the national park[7] and lose it up to £10 million in annual tourist revenue (a complete guess).  Needless to say the national interest in reducing our horrendous trade deficit, let alone reducing the unemployment in nearby Middlesbrough, wrecked by closures in the steel and chemical industries, doesn’t merit any serious consideration.  The UK government is running scared of being seen to interfere with any planning issue, so the chances are it will stand by and let the project founder on blinkered, bone-headed prejudice.

So even with the example of Greece before them, the UK government still cannot being itself to assert its authority (which it actually has) and insist on a development which will significantly help Britain pay its way in the world and reduce the debts handed down to its children and grandchildren.

End Notes

[1]  See post The Realities of British Overseas Aid by Stephen Bush on this website.

[2]  Allegedly in a fit of pique at not getting his way in cutting another part of the defence budget.

[3]  Having paid off the last of the Navy’s aircraft carriers, Cameron had to rent Italian airfields in Sicily to refuel the aircraft involved.

[4]  Net overseas investment income is now negative as foreign investors like Toyota, Nissan, etc. for the most part remit profits to their owners.

[5]  Exact figures are difficult to find, but one estimate is that over half of the capital value of the FTSE 100 largest companies is in foreign hands.  Certainly 43% of the chief executives, including those from Shell, BP, BAT, BHP-Billiton are from overseas.

[6]  WTO International Trade Statistics downloadable at www.wto.org/statistics.

[7]  The Israeli-owned ICL company already mines potash elsewhere in the National Park completely uncontroversially.

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