Jim Sillars: Let's hear the truth about the crisis

THERE must be in the depths of Gordon Brown's bunker little Mandelsonites, beavering away at a new piece of legislation – the Button up the Back of the Public Mind Bill; because it is the only way we can be expected to buy the trash that is Labour's desperate effort to make us believe in their spending versus Tory cuts.

Ed Balls on radio last Tuesday was hilarious, explaining that Brown's government could spend, spend, spend due to having run the economy successfully. In the face of questions about the public debt piling up, he claimed the IMF had praised Alistair Darling for helping to save the world. Thank God James Purnell's resignation stopped Balls replacing Darling at the Treasury. A Prime Minister in la-la land is bad enough, but to have a complete nut at the Treasury would truly sink the ship of state.

Words like "awful", "dire" and "catastrophic" do not fit the present and immediate future condition of the United Kingdom economy and the consequences that will flow into civic society from what will be required to dig us out of the deepest financial hole since the war. Contrast the Mandelson-Brown-Balls glowing scenario with the reality (I have the pecking order correct).

The Chancellor's borrowing requirement shot up to a monthly level of £19.5bn last month compared to £12.2bn in May 2008. Public debt is soaring. A major credit agency has downgraded the UK to AAA negative.

There is real anxiety among those who know, that if any more confidence is lost in the government there could be a refusal by markets to buy British debt – something that really will hit the fan. That is not a minor matter. We, like the rest of the world, operate on Fiat money – from the Latin "for let it be done". This is paper with no intrinsic value printed by government, the assessment of its worth by those who use it being based solely on the strength of the economy and the competence of the government. UK economic strength and Brown's competence?

A Prime Minister boasting of more spending, which means more borrowing, is not likely to make the international markets a ready buyer of that increased debt. We now spend more on social security benefits than is taken in through income tax, yet another indicator of the state we are in. The worry of the Governor of the Bank of England is not misplaced. We have rising unemployment, and a new generation about to leave school and university without the prospect of a job. They will be joined next year, and the year after by another exodus from school and university with exactly the same dismal outlook. We are building another tier of underclass.

In addition to all this, we have massive over-capacity in manufacturing and in the service industries, including financial services. The answer to that is increased demand, but, and here's the rub, because of the threat of unemployment, people, many of whom are benefiting from lower mortgage payments, are saving not spending, and so there is and will be a lack of demand.

I'm sorry to spoil your relaxing Sunday, but it gets worse. We are in a completely phoney period of politics and economic management right now. It's a deadly lull before a deadly storm hits us all. Labour pretends there will be no cuts; the Tories talk about trimming. How either of them cuts back decisively on debt, as any government in power must now do, is dodged. One estimate is that we need £45bn of spending cuts year upon year, or 9p on income tax, or a combination of both savage cuts and high tax increases. All options would reduce demand further.

The reality is that Britain is a poor country – yes, a poor country – whose poor condition is hidden by massive borrowing that cannot be sustained. The age of austerity beckons with reductions in the standard of living for at least the next ten years. It will be no easy task to manage down public expectations from the previous high spending and high living, to a country engaged in the deep pain of paying off debt by steep reduction in standards in public services and family standards of living.

How to manage that change requires the public be told the truth, and engaged in a debate about priorities and whether and which sacred cows can remain so. A reduction of the standard of living in a society where public services provide a significant "social wage" means more than shopping at the discount stores instead of M&S.

It poses extremely difficult choices between what is to be maintained, what is to be reduced, and what is to go. Those choices must be made. To make them requires a level of honesty from government and would-be government which is missing; as is the political courage to tell interest groups that the party is over.

Winston Churchill said democracy was not a good system of government, but is better than all the others available. We are now witnessing, and are victims of, what is wrong with our democracy. We have a government that tells lies to itself so that it can tell lies to us. We have an opposition trapped in the government lie, terrified to tell the truth – both of them in a House of Commons that is a national embarrassment and a spent force.

The country is paralysed until next May. During this period of paralysis, more debt will be incurred, more people will be unemployed, more young with their lives destroyed, and no efforts made to tackle the reality. If you hear once more Brown preaching about his Presbyterian values, reach for the sick bag.