This baby was born with a debt of £25,000. That's his share of the UK national debt. Why are politicians and the public incapable of balancing the books?
Every year, the government spends more money than it receives in taxes. The consequence is a mass of unpaid bills and a burgeoning national debt crisis. So, when will we stop spending money we don't have?
Hello, I’m Leon Hawthorne. We’re talking about the national debt… the nation’s accumulated credit card bill, which we will leave to our children to pay off.
This counter shows you the additional debt the UK is building up whilst I’m speaking. More than £5000 every second.
Last year, the UK government took in £673 billion in taxes and spent £742 billion. That’s a deficit for the year of £69 billion. Now, what would happen if, every year, you or I spent more money than we earned? The debts would simply pile up. The UK’s national debt now stands at £1.6 trillion.
Put another way, right now, there’s a baby being born somewhere in Britain. He has inherited a bill for £25,000. That’s his share of the national debt.
The government spends more money on interest to service that debt, than it spends on defence. Let me say that again! Whilst the first duty of the state is defence; we spend more on interest than we spend on the army, navy and air force put together.
Here’s the picture of UK national debt over the past century. Basically, the graph goes in one direction.
Obviously, your ability to pay off debt is easier if you earn a lot of money. So, some people prefer to look at debt as a percentage of national income or GDP. Take a look at that graph.
Debt as a percentage of GDP was highest during World War I and again during World War II. Then it dropped from the 1950s as the economy grew. The absolute debt was still getting bigger but the economy was growing faster… until the financial crisis of 2008.
The country now owes 80% of what we earn every year. So, how did we get into this mess?
The answer is simple. Politicians like to spend money and they hate to tax us to pay for it. Spending wins votes. Raising taxes loses votes. Read my lips: no new taxes. That’s what President Bush said in 1988. Then he did raise taxes and American voters kicked him out after just one term. A lesson learned by all politicians around the world.
So, when you hear of “austerity cuts”, these aren’t cuts. They are just smaller increases. Government spending, whichever Party is in office, always-always rises.
That is an unmistakably law of democratic politics!
It’s politically easier for governments to borrow money to cover the difference between income and expenditure. So, we get deficits every year and the debt piles up.
All politicians are fickle, weak, attention seeking narcissists, who want to be loved by everyone, so they give us what we want and avoid doing things we don’t want. They spend, but they don’t tax.
However… you - we, the public deserve the politicians we get. After all, they are only doing the things that get them elected. If we want better politicians, we have got to stop asking for everything while not being prepared to pay for it.
Oh, why not tax the rich… tax the bankers… tax some group we don’t like… what about immigrants, Jews, the Arab nations we invade? All those are actual policies advocated over the years. It’s an ugly road to travel along, while negating our collective duty to pay for the services we vote for.
I believe taxes should be simple and universal. All of us should feel the impact of higher taxes if we want higher government spending. Even if it’s only an extra £1 from our pay packet. There has to be a personal cost felt by everyone, otherwise there’s no penalty for demanding more spending.
This is not a left wing or a right wing view. If you favour spending lots of money on welfare or the health service. That’s fine. Just have the guts to increase universal taxes to pay for it.
And for politicians on the right. It’s all very well to talk about fiscal rectitude and then bring in tax cuts for favoured groups, but then lack the guts to cut spending, sufficient to balance the books.
Here’s my view. Britain should have a policy to pay off the national debt within a generation, 20 years. That means every year, we must have a budget surplus of around 3% of today’s GDP. No public body should be allowed to ever have an annual deficit or any debt. All spending must be fully financed through taxation.
Then we the public and our politicians have two choices. Spend less or tax more. There’s no other option.
Or is there?
For the past eight years, the Bank of England has been printing virtual money, a process known as Quantitative Easing or Q.E. It’s created £435 billion of fake money and used it to buy government bonds from banks and pension funds. It means: today the Bank of England is the government’s biggest creditor. I know it’s ridiculous. It’s a bit like your left hand owing money to your right hand. Both the Treasury and the Bank of England are part of the state.
I say the Bank should simply write off the debt. In one swipe of the mouse, this would erase nearly one third of the national debt.
It’s magic! The Bank of England can just print even more money to pay off the rest of the debt, right? Well, it could do a little more, but it risks creating massive inflation as creditors lose faith in the dodgy money they’re being handed. Inflation is - in essence - a tax on money itself, by eroding its value.
Take a look at the debt counter. More than £2 million in extra national debt amassed during the course of this video. We need a radical approach to balancing the books, paying off the national debt and thereby creating a sustainable state… and with it… a more honest relationship between politicians and voters.
I’m Leon Hawthorne. Thanks for watching.