AceNewsDesk – The national debt. Conservatives of all stripes should not give up on worrying about it

Ace Press News From Cutting Room Floor: Published: Dec.17: 2023 Conservative Home By William Atkinson Published: Dec.17, 2023: TELEGRAM Ace Daily News Link https://t.me/+PuI36tlDsM7GpOJe

Not to sound too much like Scrooge, but Christmas is a time for thinking about debts. For many, that will be from finding their bank accounts suspiciously lighter after one present-buying spree or round of work festive drinks too many. But we at ConservativeHome like to set our sights a little higher. Readers, nothing brings more Yuletide cheer than a brief look over the national debt.

Since 2020, the UK’s debt has been hovering at around the economy’s annual size for the first time in six decades. ConservativeHome has highlighted that since the millennium, our public debt to GDP ratio has more than tripled from 28 per cent in 2000 to 101 per cent in 2022. The only previous occasions where it has risen so quickly were the Napoleonic, First, and Second World Wars.

Not so long ago, at the height of the Cameron-Osborne duopoly, that Britain had reached an unprecedented peacetime level of indebtedness would have provoked uproar on the right. But debts, deficits, and austerity no longer make up the background hum of politics. Slowly but surely, the Conservative Party has started to think that our national debt is big enough to look after itself.

Boris Johnson completed Theresa May’s work in 2019 by damning austerity and running on a manifesto of more borrowing and no big tax hikes. Transitioning to big-state Toryism was massively accelerated first by a desire to ply the Red Wall’s mouth with gold, and then especially by the extraordinary shocks of the pandemic and energy crisis. Unruffled Conservative MPs nodded this through.

Being intensely relaxed about growing our national debt now unites serial tax-cutters with the more nebulous group of Tory thinkers enthusiastic about increasing state capacity. For the former, real Trussonomics has never been tried. The latter aims to finance infrastructure, encourage manufacturing, and address regional inequality: ‘levelling-up’ that goes beyond buying new park benches in Redcar.

Whilst the tribes have different objectives, both would argue that a short-term hike in the national debt was a necessary first step towards creating a more dynamic and functional economy. Both want to raise growth rates, relieve the burden on taxpayers, and reinvigorate our stagnant economy. Achieve that, and the debt will come down as Britannia is unchained/our trade deficit shrinks (delete as appropriate).

Both are vital parts of the Conservative debate around economics and will get their hearing at the next leadership election. But both repudiate fundamental tenets of Conservative economic thinking by treating debt as secondary to their ideological objectives. Doing so is unwise, especially as it means forgetting the economic and moral cases against maxing the national credit card.

The Trussonomics fiasco proved the folly of assuming the markets could take the strain. Britain’s borrowing situation is uniquely fragile due to the structure of our pre-existing indebtedness. An unusually large amount of our debt is owned by foreign lenders; we have the largest share of index-linked bonds of any country in the G7. Hence why Truss’s debt-fuelled Barber Boom tribute act bombed.

In some ways, the Mini-Budget’s implosion has provoked more introspection in Labour than amongst Conservatives. Fellow travellers of ‘securonomics’ seem not to have noticed that Labour’s £28 billion investment pledge looks moribund. Unfortunately, Tories have realised the benefits of borrowing to invest in capital spending just as record-low interest rates have risen. But it is a reality that we cannot ignore.

We also need to make clear the moral case against reckless debt accumulation. As Niall Ferguson put it, burdening future generations with the outstanding debts of today’s profligate politicians makes a mockery of Edmund Burke’s contract between the dead, the living, and the unborn. It promises Britain a future as either Japan or Greece: stagnation or austerity. The reckoning can only be postponed, not avoided.

Yet few of today’s politicians seem to be interested in doing a Helen Lovejoy. The OBR predicts that our total debt pile will more than triple to 310 per cent of GDP by 2070.

An ageing population, a growing dependency ratio, sclerotic public services, woeful government procurement, Net Zero: all are driving spending ever upwards whilst growth and tax receipts dwindle. This is before spending hikes driven by future wars, pandemics, or recessions.

As staggering a figure as that is, it will never be a priority for politicians interested in buying their re-election on the backs of future generations. Hence Jeremy Hunt using the recent Autumn Statement to appease backbenchers with tax cuts based on what spare cash could be found down the back of the Treasury sofa, and by penciling spending cuts that any future government will struggle to implement.

Keir Starmer and Rachel Reeves might mutter the empty bromides of fiscal rectitude. But in office they will confront underperforming public services, impatient ministers, and backbenchers baying for more spending. Hiking taxes is so much easier when you can blame it on your inheritance from the Tories. The longer Labour remains in government, the more likely the old bad habits are to set in. 

This is easier for a party of the Left. Then again, we are all aware that the tax burden has risen to a 70-year high under the Tories. Rishi Sunak may crow about tax cuts as he leafs through the latest Jilly Cooper, but 3 million more taxpayers are being dragged into higher bands. Debt interest servicing costs are now equivalent in size to being our second-largest department. They must be paid somehow.

They could be paid by freeing up cash by cutting government spending elsewhere, or by growing the economy faster than the rate of interest. That is what we did after those three wars, after all. But that would mean telling Tory MPs hooked on boondoggles to justify cuts or house-building to their voters. They might claim to be Conservative, but they want neither fiscal responsibility nor growth.

Making that case would be too much hard work for Sunak and Hunt a year (?) out from an election. One also imagines it is not a conversation many party members are willing to have. Tax cuts remain preferable to cutting the Triple Lock, especially when it’s the poor schmucks of my generation who will have to work out how to foot the bill. “Half of you won’t be here in 30 or 40 years’ time…”  

But one can only play the ostrich for so long. Our eventual fiscal Götterdämmerung can only be postponed for another financial crisis or two. Until then, we will find ourselves mouthing the same old tunes – acknowledge trade-offs, abolish the Town and Country Planning Act,reduce the demand for government – to an audience that seems not to notice that we are riding the debt train straight off a cliff. Happy Christmas!

The national debt. Conservatives of all stripes should not give up on worrying about it.

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