When Chancellor Rishi Sunak stands up to deliver his budget tomorrow, listen carefully for misuse of the household debt analogy. It will be used to convince people that cuts to services, to overseas aid, to councils etc are all signs of governmental prudence and trustworthiness. He will appeal to all those who, through accidents of birth or luck or circumstances have never found themselves in debt or who have a sufficient cushion to cut back on discretionary spend without serious suffering or inconvenience. They will no doubt nod and see it as confirmation that billionaire Rishi understands all about the horrors of living beyond your means. There will be a subliminal…or maybe an overt… message that other political parties would be ‘fiscally irresponsible’ and spend, spend, spend. “Thank goodness we are in Rishi’s capable hands. Such a nice boy. Did you see the film about him? So modest. He came from nowhere, you know! He’s just like us. Go ahead and make those cuts! We’d do the same. You’ve got to balance the books”.
But what if this was all nonsense? What if it was a cover for an agenda that prioritises shrinking the state and finding ways to divert more of the value created by you and me, and everyone who works, into private companies and investors’ pockets? Would people still be happy to go along with his plan?
Let’s take a look first at the belief that government debt is just like a credit card bill or an overrun on the cost of running a household. And, yes, the numbers are eye-watering.
The UK’s total debt currently runs at £2.1 trillion. We are adding about £30 billion a month to it at the moment, because of Covid-19 and Brexit. £10 billion a month is the more usual amount, but we have yet to see the full impact of Brexit carnage, which will really bite once grace periods end, so that ‘usual’ figure may well be too low.
The national debt is not like a credit card bill. People use credit cards for a number of reasons, but it is generally a combination of delaying and smoothing out the full pain of purchases and managing cashflow. Yes, sadly for some, it’s the only way to keep their heads above water until the interest threatens to drown them, but that is another story. For us, the day will come when the money has to be paid back. This is not an issue faced by our government. After all, we only ‘paid off’ WW1 3.5% War Loan in 2015 by issuing new debt, and that’s more like paying off your balance on one card by putting it onto another. As Andy Verity (BBC Economics correspondent but tweeting here in a personal capacity) explained lucidly on Twitter:
“what we fear from our creditors (bailiffs and/or repossession if we don’t pay) the Government doesn’t have to fear from the Bank of England. Can you imagine Andrew Bailey knocking on the door of Number 10 saying “Come on now; hand it over”?
And here is his very useful thread, which prompted this article:
“I’ve just got figures for how much of the money borrowed by the government since April (by issuing IOU notes – also known as government bonds or gilts) which now has the Bank of England as its creditor (which created the money to do so from nothing).
This is why it’s wrong to say that because we’ve got big debts, we must fix them immediately. Financially, governments aren’t like households. As sovereign currency issuers, they can borrow vast sums from themselves (the Bank of England is ultimately another branch of government).”
Now, some readers may be thinking that this sounds very scary and irresponsible. Shouldn’t we be able to pay back the money we ‘owe’? Well, this is where the household analogy becomes so powerful and so dangerous. It scares us into doing something that is against our own interests AND against the interests of future generations. Here’s Andy again:
“After the financial crisis [in which financial institutions were bailed out with our money – my comment], austerity in public spending and weak private investment led to the worst decade for improvements in living standards in 200 years. Please, not again.”
I think a lot of comparatively comfortably off people have little idea what havoc austerity has wreaked in millions of people’s lives, but I urge people to reflect on the hidden costs of austerity, the effects of which might only be felt by individuals when they themselves need public services. Let’s talk briefly about policing, for example. We now have only half the number of police stations that we had in 2010. Does that matter? Well, yes, when you are the victim of a crime and can’t get help or are told that thefts etc aren’t investigated because there isn’t the manpower. When did you last see a policeman in your town or village?
Fire stations are another example. Johnson has form here, having sold off many of London’s fire stations to property developers (and used special powers to do so…ring any bells?). Cuts to fire services have continued apace. It’s not just about response times (see Grenfell)- though when your thatch is burning down and your nearest fire service, manned by volunteers, is more than 30 minutes away and already at another fire, that will be a hot issue for you- it’s also the reduction in preventative checks (see Grenfell). Then there are NHS hospitals, doctors’ surgeries, flood prevention, social and elderly care…the list is a long one.
My point is that sooner or later, these cuts WILL affect you unless you are wealthy enough to buy the service you require and Bingo! You’re paying a private company!
Back to Andy:
“The pandemic put the economy and the public finances on something very like a war footing. Note in 1945, when debt was much higher, the Attlee government embarked on the biggest expansion in peacetime of the role of the state and public spending. Far from mortgaging the futures of the children of that generation’s voters, it was a long-term strategy with long-term goals in mind: a better future. And the children of that generation ended up, when they grew up, with far greater prosperity than any preceding generation.”
Here, perhaps, we could use a domestic analogy. Imagine you take out a mortgage on your house and spend the money on improvements. You now have a more valuable house which you can, perhaps, pass on to your children. Contrast that with mortgaging the house, blowing the money on the horses (or, in the government’s case, paying it to your mates for failed Test and Trace or PPE that isn’t fit for purpose or never arrives…) and letting the house fall into a state of decay in order to ‘save money’ and pay off the debt. Which seems a better strategy?
Andy explains further:
“All of which is to say that if you get the economy going with sufficient momentum, you can then grow your way out of debt – rather than cutting your way out of it. Taxes can rise later, at a time when the brake they put on economic growth won’t bring things juddering to a stop.”
The trouble with this government is that they don’t WANT to invest in us. We are assets to be exploited and costs to be cut. They don’t see spending on education as an investment in the country’s future or in health services as a way to keep us fit and, let’s be honest, cheaper to run as productive, functioning subjects! Or policing, social services and courts as a way of preventing the costs of the impact of crime or drug abuse or societal collapse. They want to force us into fending for ourselves. Got cancer? Can’t wait? Go private. See your local schools starved of finance? Cave in the moment an academy group comes and offers to take over. You’ve already learned not to report theft or criminal damage to the police because nothing will come of it.
Maybe you’ll learn that you also cannot seek redress from the courts for fraud or corruption or any number of crimes that make lives a misery, because the courts have also been subject to cuts and are overstretched. Wake up! The law is for the wealthy! Hell, this government can break it with impunity! It’s dog eat dog, mate.
Can’t get Universal Credit or disability allowance? Well, frankly, you are of no economic value, so who cares what happens to you. With an 80-seat majority, Covid-19 as a cover and all the disaster capital opportunities thrown up by Brexit, this government of kleptocrats can pretty much do what it wants and the more powerless the little people feel, the better. Oh, and keep an eye out for Patel trying to extend Covid-19 special powers to stop all peaceful demonstrations once it is safe to hit the streets.
The final, savage irony is that the very people most neglected, most ill-used, most impoverished are the very people who can be sold the idea of a munificent hero…a Johnson – a funny man who speaks their language or, more impressive still, a bit of Latin, or a Sunak, to whom they can safely entrust their few pounds, a charming man who knows what it’s like to run a household on a tight budget. Someone who is in it with them. Together.
Sunak isn’t “levelling with them” or “being honest”. It’s a con.
UPDATE: £30billion of cuts to the Health and Social Care budget. Honest? What do you think?