As the end of my first full season in a vineyard in England comes to a close I wonder what next year will bring for us?
News of some producers not harvesting due to the poor quality of their fruit and others not even having any fruit to make that decision, leaves the rest waiting for a break in the weather to harvest.
Difficult growing conditions have plagued the 2012 harvests across Europe, with reports of a significant drop in vineyard yield’s from Champagne to Bordeaux, even in Spain and Italy. This year’s UK harvest compounds a series of challenging weather events for farmers – including the worst drought in 50 years in the US and a heat wave in Russia which have led to warnings of rises in food prices globally. In the UK, the cool and wet weather over flowering in June and July both reduced and delayed the fruit set leading to smaller crops and delayed ripening in UK vineyards.
What the general public tend to forget is that a vineyard is just another form of farming (our tractor’s are just smaller). Like any weather dependent industries we are just as liable to good and bad years, which is part of the beauty of wine, it gives us the challenge of trying to make the best from what’s thrown at us, and looking forward to the years when it all goes as it should. It also means we have no two years the same. So here’s looking forward to next year!
The vineyard team has been working in all conditions this summer, with winter yet to come. They’ve done a great job of getting all the posts and wire in to support the vines – a mammoth task. They’ve just got a bit of general maintenance to do before we start to prepare next year’s planting, removal of fences and adding fertilizer adjustments. As well as our normal tasks we now have to work around our contractors for the next 12 months while they build the winery (although they are great and flying along at a terrific rate) and it doesn’t make it easy having to work around diggers, dumpers and trucks to-ing and fro-ing. Soon they’ll be into the pruning, which granted won’t be for a couple of months until the vines are fully hardened off and dormant but as with everything it will be upon us before we know it.
This is the first year since I started in the wine industry that I am not harvesting at this time of year – I said “not harvesting”, not “not working”, I figured I should take advantage of it and take the time to go to Champagne to see how harvest is going.
Despite fears earlier during the growing season that quality might be compromised, with a lot of pressure from both oidium (powdery mildew) and mildiou (downy mildew), August turned out very nice and the vineyards in Champagne were able to catch up, with much improved quality.
Some plots will not yield much, by Champagne standards that is, with less than the authorised 11,000kg per hectare.
Unfortunately, it is predicted that the overall harvest will be about 30% less than last year.
Every year, pickers can be seen all around Epernay, but this year more than usual some are just sitting, waiting for a contractor to call them in. Sadly, for a lot of them it looks like it will just not happen.
That being said, the day I was driving down the Montagne de Reims heading to Epernay, vineyards looked crowded with pickers.
A friend of mine told me, as I was walking through his vineyard: “Look, last year, this block cropped over 10,000kg, this year I think I’ll get 5,000 to 6,000kg at best. I do not need many pickers, really”.
I was also lucky to attend the testing of a new piece of equipment at a cooperative, a robotized crate dumper. The picking crates are transferred from a pallet to a conveyor (this is also robotized), and the crates are conveyed to the opening of the press where they are automatically tipped / emptied, before being conveyed to a crate washer.
At another cooperative, it takes 2 workers about half an hour, to load an 8ton capacity press by hand. The bins are quite heavy, each is about 40kg, and so it is a very physical job.
I sometimes wonder to what extent the industry in France will automatize and try to rely less on human labour.
Some tasks will always be done by humans, because it requires the experience and anticipation that a machine does not have, but some tasks will surely be done by machines, because machines are fast, efficient and do not get tired, or grumpy, or go on strike.
Could one conceive that one-day Champagne might just even think about mechanized harvest?
Jonathan Médard – Winemaker at Rathfinny Wine Estate
After two years of planning we have finally broken ground today on England’s largest purpose built winery at Rathfinny.
Now I have to admit it has been a hard slog. Eighteen months ago we needed Queens Council legal opinion to convince the planning authority that a winery is an agricultural building. We adapted and lowered the building’s height to meet planning objections. We have surveyed for every possible creature you could imagine living on the farm; bats, badgers and reptiles, you name it we have the survey. We have reports on the archeology, ecology and the history of the buildings and £5,000 later we have now relocated two common lizards. However, today we are finally starting to dig out the foundations for the new winery at Rathfinny.
This first phase of the winery will house the grape presses and fermentation tanks and will be capable of producing over 800,000 litres of wine. The building will house a laboratory for the winery, offices and work rest areas for winery staff, as well as a tasting room for larger groups, which extends out onto a balcony with views over the vineyard.
The winery has been sunk into an existing silage clamp enabling the presses to be suspended 6 metres above ground level. The pressed juice can therefore run into settling tanks with minimal pumping. When settled, the juice will then be pumped to fermentation tanks. We have an area, which will be used as a barrel store as we intend to barrel age a portion of our base wine.
In the first few years we will store all our sparkling wine bottles in the same building. However, by 2016 our production will have expanded and we will then build phase two of the winery, which will include; a dedicated bottling line and barrel store and further ‘on-lees’ wine storage for over 4 million bottles.
Our belief is that the best sparkling wine needs to be bottle aged for a minimum of three years. So we will be patient and leave our sparkling wine on the yeast lees to extract those lovely yeasty flavours until it is perfect to drink.
The winery has been designed to blend into the beautiful environment of the South Downs. The grass roof will be seeded with Southdown’s grassland and is crafted to complement the surrounding landscape. The building features locally sourced oak and flint. A bank of photovoltaic solar panels will be discreetly hidden behind the winery, so that the winery is energy self-sufficient. All water used by the winery will come from our own borehole and we are also building a water treatment plant hidden behind the existing grain barns to treat all wastewater generated, so we will be self-sufficient in water as well.
Martin Swatton designed our winery. He had never designed a winery before, but has worked tirelessly to produce not only a beautiful, sustainable built building, but also an extremely functional work area. He has worked with various consultants on the winery design including David Cowderoy and more recently Gerard deVilliers, from South Africa, who has incidentally designed the internal specifications of most of the wineries around Cape Town.
I’d like to thank all those who have helped us get to this stage, including: Parker Dann, our planning consultants and Buro 4 our project managers. And of course Liz, ‘run ragged,’ my assistant who has chased and hassled to get us to this stage.
Two years ago Russia announced an export ban on wheat and the price went soaring upwards. In 2011 their harvest recovered and exports where resumed. This year droughts have affected North America, Australia and Russia pushing wheat prices up towards new all time highs, and although the UK, on a global scale, is not a major producer and a net importer, overall our yields here have been poor this year as well.
We played the weather lottery again this summer at Rathfinny, and after the warm dry spring we thought we’d have the same problem as last year, a drought that severely affected our yields of wheat, barley and rapeseed. Instead of the feared for drought, the UK had the wettest, coldest, April to June period on record. Similar to grapevines, wheat and barley don’t like the cold, or too much rain, and several farms in the southeast got flooded.
However, despite a broken combine-harvester, all the harvesting has now been completed on the wheat, barley and rapeseed we have growing on the other 400 acres at Rathfinny not under vines. So how did we get on?
Rapeseed yields were similar to last year, a low 1.3-1.5 tons per acre. It looked really good in flower in May and June but, largely due to the cold June weather, the berry size is small hence the low yield.
Barley yields were low, slightly better than last year’s but still a poor 2.2 tons per acre, and better on the upper slopes than lower ones.
Wheat yields were generally good, 3.7-4.2 tons per acre compared to 2.2 tons last year. Bizarrely, the poorer soils yielded better results?
So how are grain prices this year? Well despite Russia’s poor harvest they still plan to export 35-40million tons but, strong global demand and poor yields elsewhere has pushed the wheat price towards new all time highs and it seems likely that, despite the US Department of Agriculture’s attempts to reassure the market that they have sufficient stocks and we shouldn’t panic, prices seem set to reach new highs.
Now this is unlikely to affect the consumer in the UK where, the price of bread is so little to do with the wheat price and more to do with packaging, distribution costs, marketing, and retail margins. However, the big bread producers have already warned that prices will have to rise.
The biggest impact will be felt in the emerging world, where grain is an increasingly important part of the diet. This sort of increase in price will be immediately passed onto a consumer who is already struggling with higher energy prices.
So some good news for farmers struggling with low wheat yields, poor news for the consumer.
On a brighter note we are about the start work on the winery building. Pictures to follow soon.
I’m currently sitting in Cornwall in a howling gale with horizontal rain and we have had to turn the heating on. However, I can report that recently the weather at Rathfinny has been glorious and the vines are coming on very well.
A couple of panoramic pictures showing the area we planted under vines this year. The area to the left (the west) currently under mustard will be planted next year.
However, the main point of this blog is to launch our new website. It now has a few more bells and whistles under ‘Vision’ showing the location, soils, climate and vineyard planting map.
It has all the old stuff like a link to the latest ‘Newsletter’ and we still carry all the latest ‘News’ about Rathfinny and the English wine industry and a link to the latest weather at Rathfinny under ‘Contacts’.
We are all putting on brave faces this year but we have to admit that so far it has been a horrible year for English grapes.
Just to recap – After a very warm, dry March (the third warmest on record), we had the coldest (for 23 years) and wettest April on record. May was cold then very warm so was average overall, but better in the north than the south. June turned out to be the wettest dullest month on record. June is a key month for grape growers, the vines normally flower in June but with 145mm of rain, which is twice the normal average, any flowers would have been washed off and it was cold and windy as well. So April – June 2012 turned out to be the wettest period since records began in 1910.
Hosepipe bans were abandoned as reservoirs were replenished and July wasn’t much better. As temperatures dipped and the heating was turned on people were asking whether we would ever have a summer. Luckily, the end of July and early August has turned out to be a little warmer.
So this year has not followed the trend of recent years for hotter and hotter English summers. However, as my kids always point out ‘it’s not global warming but climate change, Dad.’ And the statistics back that up.
Did you know that in June 2012 the average surface temperatures in the northern hemisphere hit an all-time high, 1.3°C above average!
What’s more globally the average land surface temperature for June 2012 was also the all-time highest on record, at 1.07°C above average. The global average surface temperature for January–June 2012 was the 11th warmest on record, at 0.52°C above the 20th century average.
The trouble is that whilst Austria basked in record 37.7°C heat and experienced its warmest June since records began 250 years ago, the average UK temperature was 0.3°C (0.5°F) below the 1971–2000 average, making this the coolest June since 1991.
You won’t have to tell the Americans this. July 2012 was the hottest July in north America since their records began. And the Greenland ice sheet melted at such an alarming pace that scientists couldn’t believe the data.
According to the NOAA what they call an ‘anomaly’ has not just affected Great Britain but the whole of northern Europe. Norway had one of the coldest Junes on record and northern France was also suffered.
At Rathfinny the biggest problem has been the wind. You normally get the odd summer storm, which whistles up the English Channel. Remember the Fastnet yacht races, which were devastated in 1979 and 2007? This year we had several storms and the winds seem to have been unrelenting. This is not great news for young vines, which stop growing when the wind picks-up. We planted trees as wind breaks in 2010 but they are still too immature to have any effect.
So our vines are still growing and are doing okay but should be a lot bigger. However, I feel sorry for other more established English vineyards that are likely to have very poor year and low crop yields. Of course we could all be saved by a scorching August and September. But the message is to look to the long term, the UK is still a beneficiary of ‘climate change’ and it is likely that next year will follow the trend of the last twenty years and be another scorcher.
In the meantime with a lot of hard work led by Cameron, David, Felix and Ian the trellising work is now nearly complete. We have a vineyard…
I first came across this problem in the mid 1990’s when someone gave me a bottle of Slovenian white wine which must have spent a few days on a frozen lorry travelling across Europe to get to the UK. Tiny crystals of Potassium bitartrate had formed in the bottom of the bottle. It didn’t affect the taste it just made the last drop a bit crunchy!
Don’t be offended if you find crystals in a still white or rose wine, it is not a fault per se, and it might even show that the wine was made in a more “natural” way. Crystals also do not impact on the organoleptic qualities of the wine: they are just tartrates.
However, at Rathfinny we are talking about sparkling wine. The presence of crystals in a bottle of sparkling wine is pretty much a disaster.
Combine dissolved CO2 and tartrate crystals and you have a gushing wine fountain, not as spectacular as what one can see at the Formula 1 podium, but sometimes such bottles can lose half of their contents.
Tartaric acid is naturally present in grapes. So is Potassium. Both can combine, and while the resulting salt is soluble in grape juice or ‘must’, it becomes insoluble when alcohol is present, and crystals will form at lower temperatures.
What the winemaker will normally do to protect the wine is called “cold stabilization”: different techniques can be used that ensure these crystals will not develop in the wine after it is in the bottle.
The most normal method adopted is to cool the wine down to -4Celcius for a number of days or weeks in order for the crystals to form and drop out of the wine. The wine can then be bottled and is deemed to be “cold stabile”. However, this requires huge amounts of electricity to reduce the temperature of the tanks of wine to the required temperature and keep it at that temperature for the required length of time. Another method, which we are considering is ‘electrodialysis’.
Sounds high tech? A little bit: Electrodialysis is a technique of separation through membranes of positively charged elements (cations) and negatively charged elements (anions) under electric current. Membranes will let through either cations or anions. It will remove principally tartaric acid, charged negatively, and Potassium, charged positively.
The whole process is automatic; there is a simple test that has to be done for each wine to determine how the unit is going to run, since each batch of wine is different and unique in its composition.
Why would one choose electrodialysis over more classic cold stabilization techniques?
Well, each technique has pros and cons. For example, the technique using cold temperatures to bring the wine below freezing temperature, will initiate crystallisation in a tank. The crystals will be sticking to the wall and to the bottom of the tank, then the wine will be gently transferred into another tank, without crystals. Cream of tartar (basically, crystals of potassium bitartrate) can be added to the wine to enhance and speed up crystallisation. And as stated earlier this technique is highly demanding in energy and requires lots of cleaning of tanks!
On the other hand Electrodialysis can run continuously, does not require a lot of energy, is safe, precise, does not affect the wine’s qualities, does not require additives of any sort… it requires some chemicals, and some water. All effluents will go directly into our wastewater treatment plant.
We are still investigating if this is something we want, but it looks like it might be a pretty good option for us down the line.
Many people have been asking me what grape varieties we have planted? Choosing the variety is the easy part the real problem is choosing which clone. Choosing a grapevine clone is like choosing a rose bush, you know you want a red rose, but what size of flower, when do you want the flower to bloom and do you want it to have a fragrance? The same decisions face the vineyard owner.
That is the problem that I faced, when I had just started my course, in October 2010 when I ordered our first set of vines. What clones to choose? I knew I wanted to plant Pinot Noir, Chardonnay and Pinot Meunier for sparkling wine and I’d taken a rash decision to plant out some Riesling for still wine, principally because I like it and I believed that it would do very well at Rathfinny.
I had already worked out what rootstock to use, that was a relatively easy decision. It had to be Fercal or 41B because these rootstocks have a high tolerance of alkaline soils ie chalk, which we are on. As we have a little more topsoil than some, we could use Fercal instead of 41B, as it is deeper rooting. In addition, Fercal promotes early ripening. All of that I could work out in Plumpton College library. What I could not get enough information about was the difference between the various clones of the chosen varieties.
In other parts of the world what your granddaddy planted, and what your neighbour planted and found to work, is what is planted. In the UK we are still pioneering, we have no history to our vineyards. What little we have over the last thirty years was ruined slightly by planting rather obscure German varieties. Some have done well, like Bacchus, others have not and in some instances make very interesting tasting wine! With the improving climate I was confident that we could ripen classic grape varieties but needed all the help we could from choosing the correct clones. Unfortunately, all the consultants told me different things so I had to do my own research.
Like most vineyard owners we are looking for really good quality fruit with good aromas and flavours, fruit with a good balance of sugar levels and acidity, and in the UK you need clones that ripen early. I also believed that you needed to find clones that produce open clusters (space in between the berries). Having spent a few weeks picking fruit at Plumpton College during a warm but wet September you see the effect of damp on ripe grapes! You get horrendous grey rot, and not the noble good stuff. So I wanted open clusters, which would enable preventative sprays to get into the cluster or bunches, but also allow the fruit to dry out after rain to reduce the risk of botrytis rot.
This is what I chose and we have planted in 2012: –
Chardonnay clones planted are 75 & 76 (both Dijon clones and they are in many ways very similar) and 95, which is one of the most widely planted Champagne clones; it is a higher yielding clone. Lastly, 809, which was originally isolated at the University of Dijon in Burgundy. This relatively new clone is known for its intense floral/tropical nose and rich mouth feel and it is often described as having Muscat-like overtones.
Pinot Noir Clones Planted –
GM 1-47– Is one of the most popular open cluster clones planted in Germany. It produces wonderful fruit and a medium yield. GM 20-13 – This clone produces smaller berries and so is lower yielding but has great fruit and open clusters. GM 2-6 – Is a higher yielding Pinot Noir clone, however, it also produces more open clusters. A2107– This clone also produces open clusters. Is it a medium yielding clone.
The Pinot Meunier clones planted – We36 – Meunier clone that produces modest yields and We292, a lower yielding clone. Both of these are open cluster clones reducing botrytis risk.
The Riesling clones planted – GM 198-25 – A classic Riesling clone with more open clusters, great fruit and lower yields and acidity. GM 239–20 claims to be a more aromatic clone producing both the typical Riesling terpenes such as linalool, nerol and geraniol, which produce the rose scents and considerable amounts of a-terpineol and beta-terpineol, which is more lily of the valley and citronellol (lemon and geranium). It is a more complex clone producing medium yields.
A lot of this information was gleaned from winegrowers websites, the Kimmig and Co, nursery we dealt with in Germany and Traubenshow (a German viticulture website), you need Google translate with this one!
Next year we have chosen to plant some more of the same clones as well as some other Geisenheim (GM clones) and no they are not genetically modified. Geisenheim is a research university who have worked hard to breed clones with specific characteristics, like open clusters. We are also trying some other French Pinot Noir clones and Chardonnay clones from Burgundy. One of which is spectacular and produces some of the most beautiful fruit we have tasted, the French didn’t want to sell it to us, it’s that good! More on that next year!
So by the end of 2013 we will have worked out what really works at Rathfinny. Then we can plant out more of the same on the remaining 120 hectares (300 acres).
With Mark sailing the high seas, I am in charge! When I pointed this out to him a look of horror crossed his face. “But Sarah,” he said, “you’re not allowed to make any decisions!” Well, if you’re reading this Mark as you lounge in the sun, I am doing nothing but taking decisions, decisions, decisions!! The first of which was to have a staff party at the end of the summer to celebrate all our hard work. In fact, I’ve now appointed myself Director of Social Events and Liz and I are drawing up an exciting list of future dates.
It made me smile, and I am sure there are women out there who will know what I mean when I say – bless, and he thinks he’s made all those decisions on his own. For some reason I am reminded of a card we have framed at home.
Husband: Do you know in all the years we’ve been married, I’ve never won an argument.
Wife: Yes, darling. That’s because you’ve never been right!
Anyway, I digress. If you have heard very little from me over the past month, it’s because life has been busy. At Rathfinny, I’ve been plowing through all the legal paperwork that goes with employment, building contracts, registering trade marks both here and abroad, health and safety to say nothing of dealing with branding and PR. I’m also working with Martin, our designer, on the fit out of the tasting room in the winery as well as starting to think about developing an outlet for our Sparkling Wine. In relation to that, I’m having fun visiting local artists and suppliers with a view to stocking their goods, to complement our wines. Oh, nearly forgot. I’ve also been involved in the landscaping aspects of the new winery – inspired after our trip to South Africa earlier this year and am beginning to concentrate on the fitting out aspects of our Flint Barns, the planning permission for which has just gone in. Setting up a new business has certainly thrown more my way than I ever expected!
One of my highlights though has been working with the National Trust and the South Downs National Park on establishing the Rathfinny Trail, a walk that will take people across our land, through the vineyards and up to the Flint Barns where it is hoped they will be able to enjoy a cup of tea and a scone, or even a glass of bubbly. Richard James, the Park Ranger, and I walked the route a few weeks ago and I got a foretaste of what’s on offer as he talked me through the rare flowers, told me about bees and enlightened me on the habits of the lark. Watch this space for an opening date.
I was going to write about the employment debates we are having at the moment and my plans for writers’ retreats, but it will have to wait until next time. By then, I’ll have made a million more decisions Mark!
Finally, we’ve just produced our third newsletter and you can find it here
If you are thinking about what to do with the rest of your life, or advising someone what to study at university, then think about studying wine.
I just handed in my final piece of college work on Monday of this week, a twelve-page analysis on wine sensory evaluation. Last week, after spending many frustrated hours shouting at my computer, I handed in the last of the posters I have had to produce this year, this one was on budburst of UK grown grapevine cultivars. Despite my almost luddite aversion to technology, my poor concentration span and the complete lack of knowledge about plants, soils, vines and wine production, the last two years studying Wine Production at Plumpton College have been absolutely brilliant.
Two years ago, I knew I liked wine. I’d drunk a lot of it, but I had no idea how it was produced, I could barely remember the biology I was taught at school, and chemistry was a very distant memory.
Over the last two years, we have been taught grapevine biology, chemistry and botany and soil science. We have learnt about different wines and spirits of the world, which involved lots of tasting! We spent many days in the college vineyards picking grapes, pruning vines, fixing trellising and planting vines. We learnt about different trellising systems and how to identify the various pests and diseases that affect grapevines. This year we have learnt how to make wine and we spent a day a week in the college winery, pressing grapes, racking and fermenting, fining, filtering, blending and bottling, and recently disgorging, corking and labeling the college wines ready for sale.
Earth filtering in the Plumpton College winery
Plumpton College is the only place in the UK that you can study wine production or wine business and the courses are excellent.
More importantly, if you can learn about wine and wine production YOU could be involved in a whole new emerging wine industry in the UK.
At Rathfinny we will be employing over thirty full time skilled people to work in our vineyards and winery. We need people with the skills necessary to tend the vines, make wine and sell it. We are not alone. There are various other vineyards being established in the South East of England who also require skilled staff.
I expect very strong growth in the English wine industry – there are even some crazy people growing grapes in walled gardens near Sheffield!
The simple facts are that we import over 1.8 billion bottles of wine per annum. We consume nearly 5 million bottles per day. However, we only produce about 5 million bottles per annum in the UK! Our climate has improved and with the right skills we could make more and even better quality wine. In particular we are now making some of the best quality sparkling wine in the world. Last week, Sam Linter at Bolney Vineyard won a ‘Gold Outstanding’ award for their Chardonnay Sparkling in the International Wine and Spirits Competition beating the likes of Moet and Taittinger. In fact English wine producers have won more awards for their sparkling wine than any other country in the world over the last eight years.
So if you want a job, learn about wine. This is a whole new and exciting industry that requires enthusiastic, skilled people.
I’m lucky in my job as Brand Ambassador, I get to work with some of the most accomplished Sommeliers in the world. Aside from anything else, regular contact with them allows me to build up a clear picture of the London drinking scene in top restaurants. What I can say with the utmost confidence is that English wine is by far the hottest category of the moment.
Now I’m a farmer I spend a lot of time looking at the weather. We have had over 130mm (5 inches) of rain since we planted our vines at the end of March! That’s nothing compared to Liscombe in Somerset; they had over 290mm of rain in April alone!
Not so much April showers as an April deluge. In fact it was the wettest April on record, with more than double the normal rainfall. It has also been very cold, the coldest April since 1989, March was the warmest on record, April the wettest, what is going on?
The rain was very welcome but the cold has delayed the vines bursting into life or what vineyard managers call “Budburst”. We are starting to get a few buds elongating but no green shoots.
However, in between the showers Cameron, David, Felix, Jordon and Ian have been able to get some posts in the ground. They are averaging about 200 a day, which means we will hopefully have all the trellising up by the end of July!
Jordon get your hat on!!
Try and watch The Apprentice (BBC1) next Wednesday 16th when the two competing teams are tasked with developing a website and marketing strategy for English sparkling wine. It should be interesting.
Jonathan Medard is off in Epernay this week looking at more winery equipment and we are close to agreeing the final specification of the winery so it can go out to tender in June.
I must get back to my college books, one exam down, one to go and two assignments to hand in. Then I can focus on the building work again.
“The government has cut it’s borrowing by 11 billion pounds!” the BBC news presenter proudly announced.
I was so incensed by this comment that I heard on BBC radio last week that I had to write this blog to correct it. So forgive me for not talking about the 80mm of rain we have had since the drought was announced (!), or show you pictures of our new post basher at work or even show you pictures of some of the winery equipment we have been looking at. Instead I thought I’d give a little lesson in government accounts and explain what George Osbourne means by cutting the deficit.
The other reason is that I was shocked when I recently went into my eldest son’s old school to address the lower sixth and asked them this question, “how many of you believe that when George Osbourne says ‘we are cutting the deficit’ we are reducing the amount of debt?” Nearly half the hands went up, so here goes.
The fact is that we haven’t cut our borrowing by £11bn. We actually had to borrow a further £126 billion in the financial year 2011/12, which is £11billion less than we had to borrow in same period in 2010/11. So the government has reduced the deficit, which is the difference between what the government spends and what they raise in taxes to cover that spending but they still had to borrow a huge amount of money to cover that shortfall or deficit (see the chart below).
Last year, total government spending actually grew by more that £20 billion to £703 billion, against revenues of about £580 billion, and the forecast is that government spending will rise by a further £20bn, every year, for the next three years. However, the hope is that revenues will grow at a faster pace so our deficit will fall.
So government borrowing has not fallen but risen to over £1022 billion, which is the equivalent of 66% of Gross Domestic Product (GDP) or the total size of the UK economy. GDP gives a measure for how we, in the UK, can repay that debt. When you go to get a mortgage you can normally borrow about four times your income. When you look at a whole economy a Debt to GDP level of more than 60% has historically been seen as risky, but that depends on various factors including: The state of the economy – is it growing or contracting? Do we the consumers save a lot of our earnings? What rate of interest we pay on that debt?
The last of these is the most important factor and the most difficult to predict. Interest rates are set by the lender and in the case of a government that is the international money markets. If those lenders see greater risk to lending more money to the UK because they can’t see a coherent strategy to bring down the deficit whilst maintaining the economy, then they might demand a higher rate of interest on government debt to compensate for the risk that they may not get paid back on time. If the interest rate that the government pays rises then mortgage rates will rise and that can set off a vicious cycle, where higher mortgage rates may slow the economy and force house prices down. So we end up with lower tax revenues, so more debt will be needed to cover the short fall between government spending and revenue i.e. the deficit.
So it’s a confidence game. Showing the international money markets that you can and are aiming to reduce your debt but at the same time maintaining spending and government services. It’s like negotiating with the bank manager for an overdraft.
Don’t be fooled by those who say we can spend our way out of this. We are already spending way beyond our means. Government expenditure has more than doubled over the last twelve years from £338bn to £703bn and will rise further. We have to tackle the deficit before we lose the confidence of our lenders and interest rates rise as they have done in Greece, Ireland, Portugal, Italy and more recently Spain.
So don’t panic, keep calm and carry on…
We are busy putting in our trellising posts, I’ll post some pictures soon. I’m off to write up a project for Plumpton College.
Osmosis is usually the movement of a solvent through a semi permeable membrane from a less concentrated solution into a more concentrated one. In wine making they may refer to reverse osmosis which is a technique sometimes used to reduce the alcohol in a wine without altering the fruit flavours or profile. For the purpose of this blog I am taking neither of these definitions and I am using the term to reflect the gradual assimilation of ideas or knowledge – and I promise this blog will get ‘lighter’ (thank goodness I hear you cry!)