Britain’s debt bombshell

National debt

George Osborne is something of a political chameleon. Every so often he feels the need to change his ideological clothes. Once considered a tax-cutting deficit hawk, the chancellor has also proven to be an earnest believer in big government.

You never know what you’re going to get with an Osborne budget, and yesterday was no exception. On the one hand were welcome cuts to capital gains and corporation tax, as well as an increase in the 40p tax threshold. On the other hand was a sugar tax that will please Jamie Oliver whilst hammering the pockets of the poor, and a ham-fisted intervention in the EU referendum debate.

Buried away within the Chancellor’s speech was the revelation that his spending plans are effectively in tatters. To meet his deficit reduction commitment, Osborne will have to make £31 billion worth of tax hikes and spending cuts in 2019 alone. Of course, in all likelihood he won’t be Chancellor then, so that’s ok!

It all seemed so different in 2010, when – to cheers from his supporters and shrieks of outrage from the Left – the new Chancellor promised to reverse Labour’s debt-fuelled spending binge and put the public finances back in order.

Under Osborne’s management the deficit has come down. The government is now overspending to the tune of £45 billion per year, rather than £100 billion. Yet the national debt has continued to grow at an alarming rate.

Osborne’s time at the Treasury has been characterised by a love of grand projects: for instance, High Speed 2, the ‘Northern Powerhouse’ and the Living Wage. These have proven to be expensive distractions from his central mission to eliminate the deficit and fix the British economy.

The UK’s public debt burden is astronomical. The official figure is over £1.5 trillion. But that figure ignores many of the government’s unfunded liabilities. If you include pensions, PFI debt and other liabilities, Britain’s real national debt is an eye-watering £8.6 trillion.

Debt interest takes up an ever-larger portion of public spending. The government spends almost as much servicing public debt as it does on defence. Meanwhile, investment flows into government coffers rather than the productive economy. State spending is forced up. The private economy has to make do with less, so economic growth suffers.

Think of government debt as a bathtub close to overflowing. The deficit is the water gushing out of the taps. Every second more water pours into the tub. Eventually the water will pour over the sides and start flooding your home.

George Osborne is a good Chancellor. Under his management the economy has started to grow again (albeit sluggishly) and unemployment is at its lowest level in decades. But the British people need nothing short of a revolution in our relationship with the state.

Countries with a far lower burden of public spending – especially former British colonies like Hong Kong or Singapore – tend to enjoy much higher rates of economic growth. These places are not, as some on the Left would no doubt claim, desperate hell-holes for ordinary citizens: welfare, healthcare and education are all present to a high standard. A stronger economy means a better life even for the poorest.

The alternative is a future of high taxes and slow growth. With the global economy struggling and unsustainable record-low interest rates set to rise at some point in the near-future, we will ultimately be unable to maintain a heavy debt burden without crippling the UK’s fragile recovery. Put simply: the bathtub will overflow.

Clearly we can’t go on like this. Yet politicians of all parties prefer not to think about it. No money means no expensive social projects to win potential voters. So the government continues to borrow like a bankrupt aristocrat, mortgaging our future and our children’s future to pay today’s bills.

Osborne is not a natural revolutionary: he clearly prefers to tinker with the status-quo. Whoever replaces him as Chancellor will need to be far more radical. We have nothing to fear and everything to gain from a low-debt, low-tax, small-state society.

Chris has been a member of the Conservative Party since 2010. He believes strongly in individual freedom, personal responsibility, and the power of free markets to eliminate poverty by encouraging wealth creation. Follow him on Twitter: @cjmanby1989

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The views expressed in this article are that of the author and do not necessarily reflect the views of Conservatives for Liberty.