The mere title of this article contains an important lesson for those who listen too long to the illiterate rantings of the right-wingers currently running the government. Here’s Martin Odoni to explain why:
[Peter] Oborne writes [in the Daily Telegraph]:
“The national debt continues to spiral out of control. We are closer to insolvency today than we were in 2010, when Mr Osborne took over control of Britain’s finances. Our debt will soon surge beyond £1.5 trillion – a prodigious sum which is not far off twice the level the Tories inherited from Labour. Public spending has fallen by a remarkably small amount over the past five years.”
Well, the excerpt is correct from the third sentence onwards, but before that, Oborne is completely wrong.
Firstly, in the sense he means, the National Debt is not ‘out-of-control’ as such. It is higher than is politically healthy, and it is certainly going up without a pause, but it needs to be recognised that near enough every penny that was owed in 2010 was paid ages ago, without any difficulty.
Almost all of the Debt in the current accumulation has been borrowed since the Coalition came to power. The reason the total keeps going up is because the Government keeps borrowing more than it pays off. But the critical aspect is, the Bank Of England does keep paying back the creditors, automatically and with no difficulty, and no matter which party is in power.
Even if there were no tax receipts coming in at all, that would still happen, because the Bank Of England issues the sterling currency that the Debt is made up of.
It is in fact a process that has nothing directly to do with the Chancellor of the Exchequer at all, and continues unabated no matter what policies he chooses to enact, and no matter how high or low tax-receipts are. (This is the main reason why it was probably for the best that the UK did not join the European single currency.)
This is not to say that there would be no undesirable consequences to spending without taxation – it would undoubtedly have an inflationary effect – but the notion of the Debt becoming so big that it becomes impossible to keep making the repayments is an example of projecting household economics onto national economics.
It is a common mistake, especially among Thatcherites, who continue to believe the late Margaret Thatcher’s nonsense about how managing the public finances is the same as “good housekeeping”. It is also worth keeping in mind that a) inflation happens anyway, b) ‘quantitative easing’ is a frequent and routine Treasury tactic, only for some utterly known reason it is almost never deployed for funding anything other than the banking sector, and c) under certain very strict conditions, especially with a responsive Minimum Wage, a modicum of inflation can be a good thing, as it is harder for the rich to keep hoarding wealth when they have to keep spending more and more in order to keep their day-to-day lives in the same condition.
If that has excited your curiosity, visit The Critique Archives for the rest.
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