What is the biggest lie in British politics? According to a
new post by Johann Hari, it’s that our debt is at dangerously high levels. "As a proportion of GDP," he
writes, "Britain’s national debt has been higher than it is now for 200 of the past 250 years." He makes some pugnacious points that will have you nodding enthusiastically, or groaning
wearily, depending on your political persuasion.
But he also undermines his argument right from the off, in his description of the Big Lie itself. Here it is:
"Here’s the lie. We are in a debt crisis. Our national debt is dangerously and historically high. We are being threatened by the international bond markets. The way out is to pay
off our debt rapidly. Only that will restore ‘confidence’, and therefore economic growth. Every step of this program is false, and endangers you."
Any CoffeeHousers spot the problem? Yep, it’s the idea that the government is planning — or even suggesting — that we pay off our debt rapidly. The essential difference
between the coalition’s fiscal plans and Labour’s is nothing to do with debt at all. It’s to do with the deficit, aka borrowing. It is the deficit that one side hopes to reduce quicker than the
other. As for the debt — the sum total of all our borrowing that we have yet to pay off — that would rise by most measures, whichever party was in power.
Here’s the graph showing our national debt, in real terms, for the duration of this Parliament. As you’ll see, it rises:
Even as a percentage of GDP, it only tails off slightly under the coalition, to around 70 per cent:
And by the Institute for Fiscal Studies’ calculations, it will take us decades — and several governments — to get debt back to more manageable, pre-crash levels. This is not what most
people would describe as "paying off our debt rapidly":
But let us be charitable, and imagine that Hari meant to refer to the deficit. Yet a historical overview of that conjures an even less heartening picture. Fact is that, as a proportion of GDP, the
deficit is at its highest level on Treasury records:
This is what worries the international markets: the constant borrowing on top of borrowing on top of borrowing. The very fact that last week’s Budget contained higher borrowing forecasts was enough
to provoke grim warnings from the credit rating agencies.
Why does Hari’s slip-up matter? For two reasons. First, politicians have always thrived on confusion between the debt and the deficit. It is what enabled Gordon Brown to tell
"http://www.timesonline.co.uk/tol/news/politics/article7110540.ece">a certain woman in Rochdale that Labour would "halve the debt," when they planned nothing of the sort. It is what
enables George Osborne, now, to claim that the coalition is paying off the nation’s credit card bill, when it is only adding to it at a decreasing rate.
But second, and more importantly, it fuels the idea that there are extremist debt-cutters out there, and that — like all extremists — their thinking must be wrongheaded. And yet there
is nothing wrongheaded about wanting to get the debt down as soon as possible. Take this fact for instance: by the end of this Parliament, we will be paying £62.4 billion a year in debt
interest payments alone. That’s more money than the entire Education budget. Or the entire Justice, Home Office, Transport and Defence budgets combined:
Hari says that "debt is part of the cure". I’d ask him this: looking at the graph above, does he really think it is better to spend £62.4 billion on interest payments than on
hospitals, schools, jobs or whatever? Because that looks like a poisonous sort of cure to me.