IN THE run-up to Wednesday’s Budget, everything felt topsy-turvy – the Tories bracing the country for higher taxes and Labour calling for cuts. After weeks (months, even) of breaking it to us gently, with endless briefings to the media, the Chancellor did exactly what he warned. The three words that should not go together: Tory tax hikes.
Of course, the handling of coronavirus has suffocated the economy and the government had to respond in an unprecedented situation. However, there is another ongoing crisis. The country is already dragging along a supermassive debt burden.
It’s hiding in plain sight. Rishi Sunak acknowledged during his speech that the Office for Budget Responsibility forecasts our national debt will increase to £2.5trillion next year – and this is only part of the picture. Taxpayers are lumbered with other liabilities that aren’t included in this whopping figure: state pensions, public sector workers’ pensions, the Private Finance Initiative and nuclear decommissioning are all taxpayer obligations. Altogether, it means our real national debt is £9.6trillion, four times what the chancellor quoted on Wednesday. It’s twice the size of the entire economy of the continent of Africa, according to IMF figures. It equates to £143,000 per person in the UK.
Conservative notions of ‘balancing the books’ and ‘getting the deficit down’ have long been forgotten. The government of the day has promised a Blairite wave of spending on infrastructure and public services. The bigger the promises grow, the more the debt will rise.
Public sector pension schemes, like the state pension, are ‘unfunded’. This means there is no money set aside to cover them when they fall due. The cost, therefore, is covered by general tax revenues of future years. Put simply, paid for by our children, grandchildren and beyond.
If we let this debt hang around taxpayers’ necks, the cost of our £9.6trillion overdraft will be covered by them too. Some might think this gigantic ball and chain is nothing to worry about, with interest rates historically low. It may be cheap to borrow now, but it won’t necessarily stay that way. The size of our debt and the cost of servicing it is already unthinkable, and it is likely to rise. It’s immoral to push this burden on to future generations without a second thought.
Taking it on may seem a Herculean task, yet with economic growth, we can be unshackled. In his Budget, Sunak promised a plan for fixing the public finances. But more Tory tax hikes won’t do it. All our politicians need a long-term plan to tackle the debt burden.