Labour governments have traditionally been quite ready to borrow money and create national debt. There is nothing wrong with responsible borrowing and lending at an individual or government level. At the same time, we have seen how irresponsible borrowing and lending acted as a trigger for the current world recession.
It is ironic that today’s Labour government has made borrowing a political compulsion. The government will borrow £175 billion this year which is the highest proportion of GDP (gross domestic product) since the war. That in itself is an impressive new record for all of the wrong reasons. Then add to that the borrowing planned over the next two years. This sum amounts to more money than the entire debt inherited from all previous governments put together!
Even that last record fails to do the government ‘justice’. Total outstanding government debt is nearly £800 billion or 56.6% of GDP. As we all know, debt has to be serviced, we have to pay interest on what we owe. From 2010/11, government spending on debt interest will reach £43 billion. This is more than almost any other item of government spending including the Dedicated Schools Grant, transport, police and prisons; new homes.
To service the national debt, many people will be significantly worse off through the tax and benefits system. At some point the government will be cutting public spending and raising taxes again. We are living through an incredible combination of recession and debt and one lesson from this to be very sceptical of any government offer to provide any part of a public service ‘free’. As we can see from the unimaginable debt figures, there is no such thing as a ‘free’ service from government. Only spin is free.
The government needs to live within its means to enable real stimulus measures to assist the economy. All the government is suggesting at the moment is an unspecified range of efficiencies in 2010/11 valued at £5 billion, which is a drop in the ocean. That is not a credible and open position to take in the current crisis.
Only by accepting economic reality can a government intervene to encourage renewed economic growth. Then it becomes possible to implement targeted measures such as a cut in payroll tax for small companies and a reduction in corporation tax for SMEs (small and medium enterprises). These are tangible measures that can assist the economy. Sadly it appears that the government’s party political interest is taking precedence and causing them to avoid open communication on harsh economic choices that have to be made. The longer they relegate the national interest to second place, the worse it will get.
Councillor Bob Lanzer, Leader of Crawley Borough Council
29th July 2009