Neill Harvey-Smith is an entrepreneur and founder of Families Against National Debt.
Channel 4 did the nation a great service by recently showing Martin Durkin's Trillion Pound Horror Show in primetime, and the documentary attracted 1.3 million viewers. The scale of our national debt – nearing £1 trillion on the official measure or almost £5 trillion if you include unfunded pension commitments – should be at the heart of Conservative thinking on the economy.
When you read about "savage cuts" in the media and hear threats of public sector strike action, consider this: the Government is planning to borrow money to meet its spending commitments in every single year of this parliament. This massive battle to reduce the deficit to zero, this huge struggle, is about eventually stopping the problem from getting worse. By 2015, assuming the government keeps to its spending plans, we will have added another £300 billion to our national debt. That's how hard this is to fix.
George Osborne is right to bear down on the deficit in the short-term. His target is "a balanced structural current budget by the end of this Parliament." Now he should establish a long-term Sustainable Debt Target for the UK economy. The government should set a course for meeting the old sustainable investment 'rule' – introduced by Gordon Brown – that debt should be no more than 40% of GDP.
It is easy to deride a sustainability rule that proved unsustainable. It was wrong that Brown massaged the rule to allow him to borrow more during the boom, with debt rising from 29%-37% of GDP between 2002-07. But from a high water mark of 70% of GDP in 2014, it's still an excellent target to aim for. President Obama's Fiscal Commission has come up with a proposal to bring US debt below 40% of GDP by 2037. The EU wants to get tough on enforcing the Excessive Debt Procedure, penalising countries that run high debts. Other countries are showing intent. The Treasury held fast to the 40% figure until the recession struck. Britain should set a target date for hitting that mark again.
We need a long-term lead from government to help us plan our lives. All borrowing, and all interest on borrowing, must be repaid out of taxes. Should investors, entrepreneurs and ambitious young people anticipate a high-debt, high-tax economy? When the deficit is gone, will it be time for another spending spree to satisfy pent-up demand or will the government keep a tight grip? By 2015, debt will account for 69% of GDP. The annual tax bill for debt interest alone will be £63 billion and rising. This is wasted money that should be spent on schools, hospitals, the police, defence – or left in people's pockets to spend as they please. It is growth-sapping taxation which funds nothing. A bold commitment to lower debt would send a great signal to business.
A Sustainable Debt Target is also good politics. One of the more embarrassing moments on Trillion was Alan Johnson, along with MPs from other parties, appearing not to know the difference between deficit and debt. Our democracy deserves better from its shadow Chancellor. Gordon Brown used to bore for Britain about the virtues of paying back debt. On his own measure, we will have unsustainable levels of debt come the next election. So will Labour support spending restraint to bring down debt or position itself to the left of Gordon Brown? Will £63 billion annual interest payments be just the beginning? Politicians who make irresponsible promises to buy votes with our children's money should be held to account. Debt has the potential to be a big dividing line between the parties.
At its roots, the case against national debt is moral. It is good to want the best for our children, to support and work hard for them, to hope that they enjoy a better life. Yet we defy this wonderful instinct by borrowing to fund our current lifestyles. Each generation should live within its means. On this score, we are failing. Our children will not only have to support their own needs, but find the money to pay our loans and the interest on our loans. It is not an obscure economic issue. When presented with the facts about debt, people can feel the injustice even if they are unsure how to respond. The conservative value of justice between generations strikes a chord.
The Coalition will defeat the deficit, but we then need government to tackle the debt. A Sustainable Debt Target would help the economy, marshal powerful arguments against the cry of "savage cuts", and force the opposition to show their hand.