I noted this exchange this from the minutes of the Liaison Committee hearing in parliament this week when Rish Sunak appeared before the chairs of a range of Parliamentary Select Committees:
Angus Brendan MacNeil: I want to touch on wider trade issues, but I have a small data point to see what you understand about budget deficits, which you mentioned earlier. In the 78 years since 1945, how many years has the UK been in deficit, would you approximate?
The Prime Minister: It is very rare for countries to run overall budget surpluses.
Angus Brendan MacNeil was quoting this report by me, where I noted this:
The Prime Minister was right: budget surpluses are, indeed, very rare. His party have managed just four in more than 75 years, and in 47 years in office. They repaid just £7 billion in original prices or £22.4 billion in 2021 prices over that entire time period.
They borrowed £1,491.4 billion in original prices (a number that has now gone up somewhat as this data is out of date). That means that they have repaid less than 0.5% of what they have ever borrowed.
So, three points.
First, why do the Tories obsess about government debt when they have created by far the largest part of it?
Second, why do they always talk about the need to repay government debt when they are so bad at doing so?
Third, why do they not accept that we need government deficits and that without them we would be in very deep trouble?
The evidence is there to see, but they are in deep denial about it.
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Most people don’t realise that the government debt is not a debt.
1. The national debt is money that the government has invested in the economy, but has not yet taxed back.
2. So the national debt is effectively our savings, the nation’s wealth.
3. In order to pay back our national debt would require everyone to draw out our savings, and return it to the government. Our savings are not theirs to have.
4. The national debt has never been paid back in its history, and for good reason, it represents all the good in society: healthcare, education, infrastructure, security, the legal system, and so on.
Agreed
Ian, succinctly and very well put. Excellent.
Perhaps whenever a politician trots out the phrase ‘we must repay the national debt’ or something similar, those four lines should always be the response.
Craig
NS&I is part of the National Debt. The Government owes the money to savers.
Here is a usable illustration that requires no special insight. Suppose Government repaid NS&I in full. What would happen? Investors would have their cash back (which they don’t want). What do they do? Look for a 100% secure investment that provides a return, but crucially, at no risk, because that is why they invested ( it is called ‘safe asset’ theory)? Where do they go? Nobody can give them a 100% guarantee, a risk free investment – except the Government.
So there would be huge protests: immediately, Outrage. MPs would come under such enormous pressure from constituents (trust me); Government would then be offering to take their money back. The NS&I would be back in shorter time than a Truss Government.
Absolutely right
The tories have been swimming in denial on this subject forever. Sadly, they are not swimming in De Nile – because then the crocodiles would sort them out.
The table could be a useful doorstep tool – even Liebore could use it.
Not crocodiles. Allegories on the banks of denial.
I suspect Sunak might say the most important thing is that public debt decreases as a percentage of GDP rather than in absolute or inflation adjusted terms, because we have to live within our means. That also sounds sensible but makes no sense. Government spending and public debt is purely about allocation of resources, which becomes a question of distribution particularly when taxed back.
It is a win/win for the Tories.
Perpetual debt = perpetual crisis.
Perpetual crisis is how you control a population with fear, create a dependency on those creating the crisis to sort it out (like the migrant crisis). It’s like firemen creating fires to be seen to be coming to the rescue and boosting their reputation.
Cynical? Oh yes – of course. Manipulative – yes?. It’s not who creates the crisis – it is he or she who calls it so that wins the day.
It’s pure fascist political science at work.
“It’s like firemen creating fires ” – Farenheit 451?
We need to take the next step in debunking the government debt.
That it is our savings and if the government aim is to reduce the debt, it means they aim to take our savings away from us by either taxing it or making us so poor that we have the spend our saving.
Tories and Labour use debt as a frightener but they themselves are frightened to admit that governments can spend what is necessary within the economic capabilities of a country and can tax to counter inflation if too large.
I misheard Sunak’s repy, which is why I was so exasperated on another thread; when I rasied the McNeil quote, but it is even more astonishing that Sunak should actually recognise that surpluses are not the norm (I checked back – maybe I am deaf, but he mumbles); yet he insists on expending all the effort of Government, not to fix the economy or defend living standards; but pursue austerity at enormous cost and waste of resource, in order to produce a surplus that can only come at appalling cost (and no constructive return), and which he knows is not sustainable – especially in a crisis; in an effort to reduce the national debt, when it is vurtually impossible to do so. The efforts of the Conservative Government since 2010, with Sunak in the Treasury for some time, has been to insist on austerity to reduce the national debt of < £1Trn because there was no money; only to use austerity to increase it 2.5 times, to around £2.5Trn.
sunak is achieving nothing, and at the same time laying waste the economy, destroying lives – not delivering sustainable supluses and only increasing the national debt even more. Look at the figures. He proves himself wrong every single day.
It is all somewhat reminiscent of the Great Leap Foeward.