‘Lord, give me chastity, but not yet’ has been the UK’s economic motto for years.
We save less, invest less and build less economically-vital, growth-promoting infrastructure than we should.
We’ve got a rock-and-roll economy that lives for today, unlike those sober Germans who invest for tomorrow. So who cares?
After all, isn’t austerity supposed to be over? After eight long years, we aren’t having to borrow to pay for day-to-day spending on essentials like health, education, policing or defence.
We’re paying our way without maxing out the national credit card. Yippee! Let’s turn on the spending taps and let the good times roll! But that would be a disaster.
If we start splurging cash unsustainably, we’ll just repeat the mistakes of the past. If eight tough years of austerity taught us anything at all, it should be that we’ve got to live within our means.
By borrowing to spend money we haven’t got, we’ll go straight back to boom and bust.
The pressure’s on already. There’s a long queue of Ministers and lobbyists outside the Chancellor’s door, all wanting more cash for a worthy cause.
Everyone wants the anniversary party to be a huge birthday celebration, not a funeral wake. What’s the answer? How do we spend more on important public services like health sustainably, forever, rather than going back to boom and bust?
Persuading Britain to invest for the long term may be harder than keeping a rockstar away from an after-party, but that’s what we’ve got to do.
The solution is a ‘fiscal rule’, to tie down future Governments so we only live within our means.
It means Governments can only borrow for long-term investments in economic infrastructure like fibre-optics, roads or rail.
But everything else; the day-to-day spending on things like health, schools, police or defence, has to be paid through your and my taxes.
The power of a fiscal rule is that the budget is always balanced. If it isn’t, then citizens can take Ministers to court, and the figures are independently audited to make sure they can’t be fiddled.
Our rock-and-roll economy would sober up, and stay on the wagon for good. It would mean the end of boom and bust, for the Government’s finances at least.
Businesses would have stronger, more predictable, stable foundations for wealth-creating investments in new jobs and technologies.
Public spending on things like health, schools, police or defence could increase steadily, rather than in stop-go cycles.
And we’d pack a stronger punch internationally too. The effects wouldn’t only be felt in the economy either.
We’d make Britain a generationally fairer society, because borrowing to pay for the day-to-day spending which improves our lives today just pushes the bills forward in time, so our children and grandchildren have to pay them instead of us.
That’s morally wrong, and a fiscal rule would force us to stop it immediately. Even better, a fiscal rule means Governments have to put something aside when the economy is growing, so we don’t have to borrow our way through the next recession.
Fixing the roof when the sun is shining, as the saying goes. And that creates a unique, once-in-a-generation opportunity to set up a British sovereign wealth fund, like the Norway’s extremely successful version.
By investing the fiscal rule’s budget surpluses while the economy is growing, we wouldn’t only be creating an enormous national ‘rainy day’ fund.
We can create something far more important if we invest the money to earn a fatter return, a profit, as well. Why invest the cash in Government bonds at rock-bottom interest rates, when it could earn the taxpayer five or even ten times as much in an investment grade commercial infrastructure project instead?
Norway’s fund, which is worth more than a trillion Euros, is invested in everything from West-end London property to Facebook, Google and Amazon.
And a UK sovereign wealth fund wouldn’t only be generationally-just, but socially-just too. Because, like those sensible Norwegians, low and high-rate taxpayers alike would all own the same, equal personal stake in the fund.
That would make us an asset-owning democracy on a scale that no other developed nation could match. All because of a simple, fiscal rule.