The Government recently abandoned its intention to move to a budget surplus over the next parliament. This decision is very damaging to the prospects of the next generation. It is essential that we move to surplus as soon as possible to avoid economic catastrophe.
I’m sure to most it seems no less than every week that a large group of idealistic students march down the streets of London with their Morning Stars in hand and their revolutionary spirits at the ready. They proclaim that austerity is death and cuts are the devil. But these students and their angry union associates are no less than idealistic, no less than foolish, no less than turkeys voting for Christmas. By marching against cuts, they are voting to elevate the very debt that they, the taxpayers of the future, will be paying for.
The government, in recent weeks, has done exactly what these students wanted. In a significant and dangerous U-turn, it has abandoned its intention to move towards a budget surplus by 2020. While this may be a result of the Brexit vote, and not because of angry students, this is still a very grave mistake which will go on to hurt the very same young students who campaigned to reduce cuts in the first place.
Why is it so crucial that we have a budget surplus? The answer is an easy concept to grasp: the national debt. Every minute we don’t have a surplus, this large mountain of debt piles up higher. At the moment, that pile is £1.6 trillion high, and it’s soaring further and further into the sky by the second. Some proclaim that the debt is not going to be a problem for a long time, so we can simply sit by and let it pile up, and that we should in fact spend more. So let’s consider that question: is the national debt a problem for the UK? Well, if you’re looking at tomorrow and the near future, probably not. But if you’re looking in the longer term, it’s arguably one of the biggest challenges our children and grandchildren will have to face.
Why is a rising national debt such a bad thing?
Firstly, the UK is a huge recipient of foreign investment, about £44bn net FDI inflows in 2014. That’s because at the moment, the UK is a pretty safe bet; investors look at the UK to lend money and know they’ll get their money back. But what do investors see as this debt piles up? Eventually, they won’t look at the UK in that way anymore, rather they’ll look at us as a country that does not pay its debts or return investments, as a country which is not worthy of lending to or investing in. In time, the level of investment in the UK will most likely decline, and the economy will shrink. After that, people and governments just won’t lend to us. Then we’ll face a real crisis where the poorest in our country will be harmed purely because of the complacency of governments to work in deficits. In time, the debt will come back to bite us.
There is also the significant issue of debt interest payments which form a large and growing part of the budget. We now spend more on debt interest than on our military, housing, transport, and police. Is it right that such a large portion of our budget—almost £50bn in 2014—goes towards paying back debts incurred by past generations? And is it right that we should burden an even larger sum onto the next generation, so that they have even less to spend on their vital public services? No. It is beyond criminal to leave such a burden.
On the subject of debt interest payments, there is another point which is very important and often overlooked. Debt interest payments are very high at the moment, but if you think they’re high now, just wait. Because at the moment, interest rates on the repayment of debt, like most current interest rates, are very low: below one per cent. But what happens when the interest rate rises (because in time it will) to the much more normal levels around two to five per cent? While this may take quite some time, it will eventually happen, likely when the burden is not on us but the next generation. When it does, debt interest payments will soar to unprecedented levels, and if you think austerity is bad now, the austerity necessary to combat this will most likely be much more significant, and most likely harm the poorest in society to a much greater extent than if we cut now. That is why we need austerity at a much larger scale as soon as possible, and why we need to move to a surplus as soon as we can.
More austerity now, less austerity later.
Thirdly, it is fundamentally immoral to pay for things now, and hope that future generations will pay the bill for us. Having a deficit is no different to a parent leaving a bill, loan repayment, or mortgage to a child to inherit; any parent would argue that this is immoral and most would shudder at the thought of leaving any of their own personal debts to their children – but this is exactly what we’re doing so long as we have a deficit. We are leaving the bills of this generation to the next. It is ironic that the people campaigning against austerity the most are the young, when in fact, doing so is going to hurt them the most.
Their fight against austerity is driven by nothing more than a desire to bring down student fees and is by the commands of Student Unions angered by cuts to funding and a Conservative government. To these people I say, if we do not cut now, we will have to cut a lot more in the future.
The national debt is piling up rapidly; it isn’t piling up on the shoulders of the current generation, but on the shoulders of the next. As this debt piles up, the amount we spend repaying it goes up too, and this only facilitates even greater austerity in the future as long as we do not start paying down our debts. Not having a surplus – which we need as soon as possible – both immoral and uneconomic.