Paying for it

 

Siren voices are already shouting alarm about the additional government expenditure necessary to keep the economy alive and kicking during and after the pandemic.  Shock, horror, we are warned:  "The Debt to GDP ratio is now over 100%, something that it hasn't been since 1963."

Well, I was in my mid-twenties in 1963 and I can assure them that it was a very good time to be alive.  Not quite as seminal, perhaps, as Philip Larkin's famous poem claims:


Sexual intercourse began
In nineteen sixty-three
(which was rather late for me) -
Between the end of the "Chatterley" ban
And the Beatles' first LP.

The sexual revolution, and indeed most aspects of the "swinging sixties," rather passed me by.  I'm not sure now whether to be thankful that I was protected from indulgence or sorry that I missed out, but in the swing or merely observing, it was a thoroughly enjoyable and stimulating time of excitement, hope and optimism.

I was in the first few years of my teaching career, pleased with what I was achieving, looking forward to greater challenges to come, and without the slightest apprehension that I should ever be without a job.  Others in my age group who found that they had chosen the wrong careers on leaving school cheerfully jacked in their jobs, retrained and began others.

The Prime-Minister, Harold Macmillan, had told us that we'd "never had it so good" and there was some truth in that.  Employment was secure, the average cost of pint  was around 2/-(about 10p in the as yet to be introduced new money), and houses averaged at £2 670 . The £sterling exchanged at $2.8n nearly three times what it's worth today, and you could enjoy a continental holiday for £50.

The Labour Leader Harold Wilson, from nearby Huddersfield, assured us that life could be even better if we dragged ourselves firmly out of the Tory comfort zone into the second half of the century  and harnessed the "white heat of the technological revolution." In the 1964 general election I attended a Labour Party rally in next-door Cleckheaton, where their Deputy Leader, George Brown, concluded his speech by proclaiming that  if we did all the things he'd outlined "We really will build a New Jerusalem in England's green and pleasant land."  Even though I was already a member of the Liberal Party I stood up with the rest and cheered.

True, wages were measured in hundreds rather than thousands a year, and there were some unexpected hitches in achieving the New Jerusalem, but the over-all atmosphere was one of great confidence and optimism.

I do not remember anybody ever mentioning that the Debt/GDP ratio was over 100%

In our  economics courses there was a brief discussion of whether or not there National Debt was a "burden"and the standard answer was "No." Indeed, given the fact that growth and inflation would gradually reduce the ratio is was foolish  not to borrow to invest in the future.

This remains broadly true today, though with certain modifications,.

Then almost all the National Debt was held domesticly: it was money we owed ourselves, borrowed from those of us willing to lend (pension funds, insurance companies, financial institutions, holders of National Savings, even gamblers buying Premium Bonds) and paid back by the rest of us, including the lenders, through taxation.  Today, as a result of the "Big Bang" financial deregulation,  about 30% of the debt is held overseas, and if this generation of tax-payers doesn't repay it than future generations will have to.

Then continuous economic growth was seen as natural and desirable.  Today some of us have our doubts and would like us to look towards a Steaday State Economy, with progress being made by fairer sharing rather than further depletion of the earth's scarce resources and poisoning of the environment. Perhaps with more attention we can devise a method of achieving green growth.

On the plus side, back then the interest which had to be paid on the national debt was real. Today interest rates are close to zero if not actually negative, and so there's never been a better time to borrow.

It may be argued that government borrowing, which adds to the National Debt, is fine for investment purposes but not for current expenditure, and that much of what Rishi Sunak  is proposing to spend (eg the furlough payments) is in fact current expenditure.  True, but keeping the economy alive for the future  is, in the present circumstances, equivalent  to investment.

So let there be no worries about how to pay for it.  

Pay for it we will, as we have done in the past.  Personally I hope we will pay for it by intelligent and fair taxation rather than cuts in government expenditure.  A wealth tax has been mooted and supported by no less an authority than the former head of the civil service Sir Gus O'Donnell.  In an article in the Guardian last week, Polly Toynbee estimates that a wealth tax of 10% would yield £1tr, enough to pay for everything we want to do and more so.  

Even it that includes 10% for my modest wealth I'll by happy to vote for it.