Nick Timothy is right; the age of austerity is nearly over. After eight long years, we’re aren’t having to borrow to pay for day-to-day spending on essentials like health, education, policing or defence. It’s all funded by our taxes, at last. We’re paying our way without maxing out the national credit card. Hooray!
But why does it matter? Is it just an ideological obsession? Are we sacrificing long-suffering, hard-working families on a flinty free-market economic altar? Or is there something more fundamentally important at work?
Yes there is, and it matters a lot. Because if we borrow money to pay for day-to-day spending on things like hospitals, schools or policing, we are expecting future generations to pay the bills when they come due. We are asking our children and grandchildren to pick up the tab for our lifestyle today. And that is morally wrong; generationally unjust and unfair. They will have their own public services to pay for and we shouldn’t expect them to pay for ours as well.
Day-to-day spending is different from investment, of course. If we borrow to build new infrastructure like high-speed rail or lightning-fast broadband which future generations will use as well, it’s OK to expect them to shoulder some of the costs. So we can still borrow to invest.
And Nick Timothy is also right to say we could do quite a bit more borrowing to invest, particularly now the rest of the budget is coming into balance. Our economy will grow faster, and will be far more robust and balanced. We’ve had a rock-and-roll economy that’s been far too dependent on consumer spending for years. This is our chance to put it right.
But investing more in infrastructure won’t be enough on its own. The Chancellor is right to remind us that, even though the deficit is nearly gone, the national debt is still there. And it’s far, far bigger than the deficit ever was, even at its peak.
So if it took eight years to master the deficit, how long before we conquer the debt? Are we condemned to more endless, miserable decades of austerity?
No we aren’t, but faster economic growth and productivity improvements won’t be enough to solve the problem on their own. We need to save a bit too. And not just by paying off the debt; that would take years. We can solve the problem much faster if we invest in something that gives us a fatter return, a profit, as well.
That’s why I’ve suggested we establish a UK Sovereign Wealth Fund (SWF) like the ones Norway and Australia have.
Norway’s is now worth over a trillion dollars. Through it, every Norwegian citizen, whether they’re young or old, rich or poor, owns bits of West End London property, and shares in Facebook and Google too.
By funding our national debt with a big pool of investments, our children and grandchildren won’t have to break their piggy-banks to pay our IOUs; they’ll have assets to match. So it would be generationally just.
Socially just too. Because, like those sensible Norwegians, everyone would have the same stake whether they were rich or poor.
So a Sovereign Wealth Fund wouldn’t just tame the deficit: it would cage the debt too. And it would make Britain a generationally fairer and more socially just place. And it would rebalance our economy so it had stronger and safer foundations than ever before. But best of all, it would mean we’d avoided decades more austerity.