What About That Debt We “Need To Pay”, Gideon?
January 18, 2015
by Martin Odoni
Did anyone else notice this little announcement from George Osborne on the 8th of January? He was essentially endorsing a previous remark from Michael Gove, the Chief Drip… er, Whip, about how, by 2020, there should be a budget surplus in the public finances of about £23 billion. The hope appears to be that about £7 billion of this putative surplus could be used for a fresh round of tax cuts at the end of the next Parliament.
Now, the chances of this surplus really being there in five years’ time are extremely low, as they depend on there being no corresponding slowdown in the economy as a result of the spending cuts required (supposedly) to wipe out the deficit. If such a slowdown happens, which it almost certainly will, it will result in a reduction in tax-receipts due to rising unemployment and reduced consumption. Hence, cutting without caution is almost invariably a self-defeating exercise, and a public sector surplus is rarely good news, as it usually means parts of the private sector have ‘slack’ in their performance that the public sector should be compensating for – failure to do so usually results in substantial job-loss and reduced growth due to unconsumed private sector product.
But that is not the focus in this case. Let us assume for a moment that this surplus somehow manages to emerge, and there is room therefore for this plan to cut taxes in 2020.
My reaction to that idea is still “Hang on a cotton-pickin’ minute!“
We have spent five years listening to the eternal and repetitive mantra of the Coalition, “The Debt has to be paid back!”, “We’ll go bankrupt if we carry on like this!”, “We’re out of money!”, “The burden of Debt is so great it’s crippling our economy!”, “We’re running out of time to start repaying the Debt!” and so on. Surely if the Chancellor really believed this, then the very moment that we are running a surplus, he would use every penny of the extra money to pay back a handy chunk of the National Debt and take some of the putative pressure off? Instead, he is suddenly talking about using (at least part of) it for cutting taxes?
Now Osborne offers some vague qualifications to this by arguing that tax cuts will be part of the ‘long-term economic plan’ he never stops telling us he has (translation: His request for permission to make unending rolls-of-the-dice) for helping stimulate the economy further and pay down the Debt more comfortably further down the line. And in fairness, there is an element of genuine calculation in that; a well-timed tax cut can indeed help boost private spending and so stimulate extra growth.
But this still amounts to yet another major inconsistency in Conservative rhetoric. Even if there is a degree of economic literacy in the idea for once, it no less contradicts the above mantra about how tackling the deficit and the National Debt is the big concern overriding all others. Crying out, “We have to consider the Debt!” and assuming the conversation is ended has been a pretty standard tactic of this Government whenever objections have been raised against Austerity policies. So, a possible surplus of £23 billion should be the perfect antidote to this, and should surely be put exclusively into getting rid of some of the Debt and reducing the supposed ‘burden’.
But if, at the moment it finally materialises, the Tories suddenly start suggesting they can be flexible with that money after all, that would mean they have been telling us something that is not true for five years. We already knew that anyway of course, but this would imply that they have known all along that it is untrue. (Or if they did not, they are trying, at best, to perform a Titanic-sized u-turn while pretending not to.) It further raises the ugly question of why that money could be made available for cutting taxes, but cannot be made available for investing in programs that help the many thousands of poor, sick, destitute people who have been completely abandoned by this Government.
Likeliest explanation? I suspect this is another standard Tory tactic, only watered down because of the circumstances – deferred manifesto-bribery. The Conservatives want to find a way of talking about their favourite topic of tax cuts just ahead of the General Election in May in the hope of luring a few extra votes. While the deficit is still standing at over £90 billion – and it is despite George Osborne’s claims – the only way they can sound at all plausible is to talk about most of the tax cuts happening at the end of the next Parliament instead of at the start. This makes the bribe sound a lot less appealing than one announced to take effect in, say, March this year, but it will sound better than no bribe at all.
I just hope there are too many British voters out there whose intelligence is greater enough than their greed to fall for something so shameless.