AS far as I know “It’s the deficit stupid” was never said by Bill Clinton, but for Britain right now it is more apposite than Clinton’s famous quip “It’s the economy stupid”.
Let’s recap. When Labour came to power in 1997 the UK had a budget surplus and it was growing. In simple terms, our government raised more in taxes than it spent on salaries, services, welfare payments and infrastructure or defence equipment. By the end of its first term of office in 2003 that surplus had been wiped out – and the country remained in deficit for the rest of Labour’s rule.
Each year there is a surplus it is possible to make a substantial impact on reducing national debt and at least we don’t add to it, but when we have deficits the country has to borrow more to fund the shortfall, paying back only interest payments on existing debt. So we add to our national debt.
When you add to the public sector debt additional items such as all the public finance initiatives so loved by Labour to build schools and hospitals that were kept off the UK’s national debt, but which under new accounting rules have to be included, it is easy to see why national debt is soaring.
Add to that the debt caused by underwriting the bank failures in the banking crash of 2008 and it all gets worse. The last time I looked at the national debt clock it was £1,333,577,650,014 – a figure so large that it’s incomprehensible to everyone. Put it this way, by the time I had typed the number out the interest on the debt had pushed it up by another £50,000! Just a few seconds more and it was up by £100,000 – and it just keeps rising.
To his credit the Chancellor has laid great store in bringing the deficit under control so that it is eventually eliminated, turned back into a surplus so we can begin to start getting the national debt down.
This is the most important issue facing the United Kingdom today (and would have also been the most important issue facing an independent Scotland had that happened – so let’s not split hairs about whose deficit and debt it is). It’s important because when the debt gets so high the interest payments become difficult to keep up with. Money spent on interest is less money for hospitals, schools and nurses’ or teachers’ salaries.
Now that problem may all seem obvious and challenging enough if the world stood still – but it doesn’t, for you then have to add to this the changing demographics of Britain’s population. With the average life expectancy and the number of people above 65 both increasing there is a welfare time bomb that can only be defused by the country getting into surplus. But more people living longer makes that harder – it means we are more likely to have to borrow even more to pay those pension and healthcare commitments.
So forget about the party politics for a minute, every party should want to see the deficit eliminated and a surplus achieved. Unfortunately, that is not the nature of politicians. Even when political leaders talk about austerity – cutting back on expenditure and trying to raise public revenues by hiking up taxes – they still seek to spend money they have not got. Instead of getting out of the hole they dug, they keep digging. And, perversely, we keep cheering them on!
They are in the market for votes and believe that to secure them they must tell people they can have existing services for free or new services at no cost. There is a cost, of course – but that’s been postponed to later (usually after they’ve gone to the parliament in the sky) so that your children or more often your grandchildren will pay for what you vote for.
Immoral? Well, if it was a private business politicians would be locked up for fraud. It’s that dishonest.
So when the news came out this week that the coalition government’s deficit reduction plan is falling short of its target it was bad news for them – but it was also bad news for you, your kids and their kids. And if you don’t have kids it was bad for your neighbours and their kids. Nobody escapes the wrath of the national debt.
The key reason is that we have a structural imbalance in the size and cost of the state – our public sector and its services is larger than what we can afford. Understandably, there is great resistance to cutting jobs or reducing salaries or welfare benefits (as was used in countries like Ireland and Greece, where they were cut by ten-20 per cent). The best the government can do is change some rules but the public sector payroll bill and welfare costs are planned to rise not fall. That’s not austerity, that’s managed restraint.
We’ll all have to work harder as a result to pay more taxes – but meantime can politicians stop making promises to spend more money they don’t have?
And that debt clock? It’s already £1,333,588,536,014 as I finish typing.