views

We’re lying to ourselves on spending

Allister Heath
THERE was no clear winner from yesterday’s debates, in contrast to last week’s, when Nick Clegg triumphed. This time was very different: Gordon Brown did his best but failed to convince viewers, according to instant polls; Cameron fought back but didn’t manage to put in a game-changing, breakthrough performance. Clegg wasn’t as convincing as the previous week and sounded naïve at times.

While the exchanges were much more heated than last week, the debate remained far too parochial, a boring battle over details. Everybody agreed with the mainstream view on climate change, for example. In the case of Europe, where there are relatively large differences in policy, the leaders actually downplayed their differences. The clashes were more vigorous on the national insurance hike, which Cameron rightly opposes; immigration, where the Tory position is substantially more restrictive than Labour’s and especially the Lib Dems; and on retaining Britain’s nuclear deterrent, which Clegg opposes. Even then, however, it is sad that the “debate” on tax was restricted to the equivalent of 1 per cent of state spending, or that – apart from Brown’s call to “get real” – they so underplayed the huge risks from terrorism and –?even more scandalously – refused to discuss their plans (shared by all three) to cut spending on the armed forces to protect the welfare state and foreign aid.

It still seemed as if the leaders were appealing to 5 per cent or so of centrist, floating voters in marginal constituencies; there was a concerted attempt not to frighten the horses. None of the leaders are in the mood to present a radical alternative to the public – and to be fair, the public is not in the mood to listen. It was a case of ask not what you can do for your country; ask what the government can do for you. We live in a culture where most of the public wants to extract as many goodies as they can for themselves, rather than accepting the need for serious belt-tightening.

What was most depressing was that the budget deficit was mentioned so rarely last night, especially given that figures out yesterday revealed that public borrowing hit £23.5bn last month – more than any other March since the end of the Second World War. Our fiscal situation is a disaster: the full year 2009-10 budget deficit reached £163bn, 11.6 per cent of GDP.

As Citigroup points out, the 2009/10 UK?budget deficit is the highest (as a share of GDP) of the last 100 years excluding the world wars and the years immediately on either side. The exploding national debt is the reason why government interest payments jumped 70 per cent in the first quarter, with interest payments in March up 133 per cent year on year. If a hung parliament after the election leads to a stalemate, gilt yields could easily surge – and let us not forget how high they can go when markets lose confidence in a country. Greek long-term debt was yielding over 10 per cent yesterday; the gap between Greek and German debt hit six percentage points, a level last seen in February 1998 before the euro. It is not fair to compare Britain to Greece, a country that is now on the brink of insolvency – but we should never forget what can happen when a government loses control of its public finances. Britain simply cannot afford to continue spending so much on its public sector – yet this most fundamental of all issues was barely even mentioned last night. There are no more damning indictments of our political culture.
allister.heath@cityam.com