THE Comprehensive Spending Review has arrived, with George Osborne today announcing departmental spending targets for 2015-16. But however he trims Britain’s deficit, debt is still rising. And from a historical perspective, Osborne would do well to sit up and take note.
Debt has long been bodyguard to the nation’s finances. Take the Hundred Years War. England astonishingly managed to keep in the game by some pretty sharp practice with its creditors. Edward III alone broke two Italian banks, and once had to disappear from Flanders when acting as personal security for a loan. Debts got so bad, fighting frequently had to be privatised to self-funding freebooters, occasionally provided with what amounted to a mediaeval startup grant.
Over the eighteenth century, Britain had to borrow to bail out the South Sea Company, contain the ambitious Bourbon monarchs, fight off a grand coalition exploiting the disasters in the American colonies, and subsidise allies against Napoleon. A century of peace, population explosion, and territorial and trade expansion brought the debt down to within sight of extinction. Then in the twentieth century came two world wars and the ballooning state. Each phase was paid down by slashing state funding, and acquiring and then discarding an empire.
But today’s debt is carelessly accumulated. The UK economy found itself with a shocking New Year’s hangover on 1 January 2013, with a debt that had reached a memorable £1.111 trillion. By May, it was up to £1.1892 trillion, but let’s stick with the sum anyone can remember down the pub.
Readers of City A.M. will have a stronger grasp than most of what that means. Forget it as a share of GDP: debt exceeds state revenue by a factor of approximately two to one. Yet abstract figures remain like Teflon to the grey cells. Let’s try to help out here.
Former Prime Ministers can make a mint on the speakers circuit. We could send Tony Blair to work off the debt on a global lecture tour. Given his reported rates, putting in eight hour days all year round, and just working off the debt as it stood on 1 January, he’d be back in Britain in 3047 AD.
How about £1.111 trillion in terms of HS2? Forget Birmingham. That money would generate a high speed rail connection running from London to the Khyber Pass. A fridge mountain? We’re talking a pyramid of John Lewis Zanussis erected beside the Mall, as tall as an Alp. A tardy tribute to Baroness Thatcher, instead of the mooted renamed Bank Holiday? You could distribute 22,821 statues identical to the one that triggered debate in Grantham, except that each would be smelted from gold.
It would, of course, be missing the point about the Iron Lady and her views on profligacy; she saw persistent deficits as bad housekeeping and perceptively told Ronald Reagan as much. It is a lesson we as a nation have forgotten. Yes, deficits have been with us in the past when fighting for our lives. But they are a disastrous and needy casual friend.
Dr Lee Rotherham is author of A Fate Worse Than Debt: A Beginner’s Guide to Britain’s National Debt from Boadicea to Cameron.