I used to write about bond markets, so I speak with some authority when I say this: bonds are boring. Really, most normal people find talk of gilts and yields extremely tedious. Likewise, terms like debt and deficit are off-puttingly technical and easy to mix up. Basically, the public finances are hard to get excited about.
But getting people excited about bonds and debt could well be a vital factor in deciding the next general election. Today, Tories are feeling chipper. They think the Truss-Kwarteng non-budget frames the next election as a stark choice between exciting Tory tax cuts and boring Labour managerialism and taxes.
Missing from the debate today, because there is no OBR or Treasury forecast for the public finances, is any discussion of debt and deficits. A key challenge for Labour will be starting that discussion and keeping it going.
It is an unavoidable fact that the government’s choices are going to increase the UK’s national debt. That debt, in the form of outstanding loans – gilts – must be serviced. Before today’s statement, the national debt was equal to around 96 per cent of GDP and Britain was on course to spend approaching £100 billion on debt interest this year.
Those numbers are not small, and they will rise.
Could Keir Starmer’s Labour successfully deploy the Cameron-Osborne attack line on the Conservatives?
Advocates of the Truss plan say that’s fine. They note that UK debt levels are mid-table by international standards: France, Japan and the US owe more, for instance. This is a new era, they argue. Developed economies can and should borrow more to support economic activity.
The challenge for advocates of Trussonomics and their sanguine attitude to debt is a huge shift in position from the one they took a decade or so ago. The 2010 general election was largely fought (and partly won) on the Conservative premise that the national debt was a direct problem for households and must be reduced.
Younger readers may not recall 2010, while some older ones who want to support the Truss agenda have chosen to forget it. So I feel duty-bound to provide a quick reminder of that election and its politics. Simply, the Tory campaign was based on the assertion that Labour had racked up an intolerable stock of public debt which would impose an unfair and unjustified burden on future generations.
The most effective illustration of this campaign came in 2009 with a brutally simple poster showing a newborn baby over the caption:
Dad’s nose, Mum’s eyes, Gordon Brown’s debt.
The poster added that every child in the country is now born ‘owing £17,000’.
That claim was based on a forecast that the national debt would hit £1 trillion, or around 60 per cent of GDP, within a few years. (Using that same CCHQ methodology, every child born last week owed around £45,000. I wouldn’t be surprised if today’s policies push that number over £50,000)
It was, as Fraser Nelson noted at the time, a highly effective way to make a dry, boring subject into something emotive and politically salient.
Philosophically, that poster captured what was and had been for many decades Tory orthodoxy: debt is bad because sooner or later, someone has to pay the tax to service and repay it. The party of Burke (society is ‘a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born’) considered imposing a fiscal burden on future taxpayers to be wrong and harmful to growth.
On that basis, David Cameron and George Osborne succeeded in driving Gordon Brown out of Downing Street. That same view of debt and debt underpinned the austerity agenda. The rest is recent history.
I take a fairly middle-ground view on debt and borrowing. I’m fairly relaxed about governments borrowing to spend on stuff that enhances the UK economy’s productive capacity, and I include things like education and training in that category.
But I do worry that we’re now heading for an epic fiscal hangover in the next parliament, where the costs of servicing our very large national debt will constrain any government’s ability to spend on those productivity-enhancing things. As I wrote here earlier this week, I’m worried about the long-term outlook for education spending, and thus productivity.
What I think doesn’t matter, of course. I’m just an out-of-touch wonk at a centrist think-tank. I and people like me are not representative of any significant slice of public opinion, and we shouldn’t claim to be.
What matters to the next election is what the wider electorate thinks. In 2010, Cameron and Osborne and their Conservative colleagues succeeded in persuading voters that the national debt was a real and important problem for them and their families.
Could Keir Starmer’s Labour successfully deploy the Cameron-Osborne attack line on the Conservatives? There are all sorts of reasons that the party could be wary of such a strategy. But imagine a political battle where Labour deploys posters of another baby and the caption:
Dad’s nose, Mum’s eyes, Liz Truss’s debt.
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