Dr Lee Rotherham is author of A Fate Worse Than Debt: A History of Britain’s National Debt from Boadicea to Cameron, out now in bookshops.
We live, so pundits say, in an Elizabethan Age. We can tell
this because we have very few colonial possessions, tax tobacco, argue with the
Pope over the New World, and occasionally (accidentally) land naval forces on
the beaches of southern Spain.
A more cutting comparison comes with our debt. Elizabeth
more than once found her policies constrained by limited finances, but
ingeniously on one occasion seized money being sent by bankers to the Spanish
Netherlands and took the loans on herself. The Spanish never got the money;
their troops rioted; the Netherlands exploded into revolt and the Dutch ended
up independent, all for the sake of a canny bit of remortgaging.
We should learn from our past, from our mistakes and our
successes. But it seems that we have misunderstood what debt has meant to
Britain, what it’s been used for, and what its effects have been – from triggering
rebellions that butchered tens of thousands of Romans, to seeping into
revolutions that executed a king; from underpinning a century of devastation in
mediaeval France, to financing the fatal rivalries of the Bourbon and Georgian
Sadly, our modern debts do not seem to have been considered
in any rational context. Why else is that for every five pounds our government
spends, Whitehall still borrows a sixth to hand out with it? It means that our
nation’s debt stood at over £1.1 trillion on New Year’s Day and is set to go up
to £1.5 trillion. That very memorable £1,111 billion is already a dreadful
party hangover. For all the talk in the
media about that being a manageable 70% of GDP, the real truth is that it has now
surpassed 200% as a share of Government spending.
Unfortunately, history does not provide us with any real
cause for optimism. There are only three parallels from history dealing with a
crisis on this scale. The first is the debt that arose from the South Sea
Bubble and was subsumed into the loans that mounted from a century of wars with
France, ending in 1815. But with the exception of the disastrous War of American
Independence, they were also associated with a series of peace terms that
either expanded the Empire or extended the global thresholds of British trade. As
importantly, the population exploded and per capita the debt shrank. Even then it
took another century of relative peace and minimalist public spending, giving
generations of politicians time to sort their budgets out by running a surplus.
The second comparison is that of the First World War, which
was paid off by a partial default on the US loans but was also funded by selling
off foreign assets to buy the munitions in dollars at source. Even then afterwards
it required a massive paring back of public sector spending in the UK and
across the Empire (including the so-called Geddes Axe) on such a scale and with
such occasional mismanagement it triggered a naval mutiny. But we still had an
Empire and a massive trading bloc in support.
The third comparison is that of the Second World War coupled
with post-war commitments to public sector spending. These latter would prove
dwarfed by their modern counterparts, but as Churchill’s Chancellor predicted
in 1944 would still be a crippling blow for a post-war economy to shoulder. The
UK weathered the gale only by surrendering its global primacy and trading pre-eminence
to the United States, but it was at times very touch and go, and as Suez shows
the financial throttlehold meant the economy occasionally came close to
But in all three instances, the UK chose the route of debt primarily
through necessity. In all these cases, the very survival of the nation was at
stake. Our current debt by contrast is one of choice, indeed of gluttony.
At best we might compare one element of our present
predicament with our past, Northern Rock/RBS with the South Sea Bubble bailout.
There, government became involved after a collapse in confidence, in a febrile
atmosphere of panicking savers (which included many of the Government’s key
supporters). But in neither case, ancient nor modern, was state involvement a
foregone conclusion from a dispassionate economic vantage point. State
intervention in the 1720s was notably not repeated in many subsequent collapses
in canals and railways, where rivals were left to step in and take advantage of
their competitors’ mistakes. Nor was it associated with ministers who
incompetently had run a trail of deficits in good times as well as bad. Where
is our Sinking Fund today?
But we are where we are. The 2013 Budget is upon us. It will
still not quash the wicked legacy of the Brown years as Chancellor and as Prime
Minister. It will leave the well with a higher water table, but still poisoned
So, after these latter-age Elizabethans, what will the
Carolingian age bring us, and the age of William? What of the next in the line
to throne? I rather fear an appropriate name for the royal progeny if a boy will
be Edward. Edward I and Edward II both broke a bank with their debts; Edward
III managed to break two. Given our political leaders’ measured indifference to
the scale of our public debt, and a limp commitment to reduce the deficit but
not to reverse it, for years to come servicing the debt will take up so much of
our finances we may as well dedicate a special Cabinet Minister to sign the cheques
off, since his budget will exceed those of almost all the Secretaries of State.
The best we can say of this season is that, by comparison
with the lot that faces us under the Balls condottieri, ‘things can only get
worse’. If Labour gets in, the deficit junkies will grab control of the store
cupboard again. Our present grim forecasts will become permafrosted. Last time
round, Liam Byrne jokingly pointed out that Labour had spent all the money. He
might have truthfully pointed out all the mortgaging that had on too. The
present Labour leadership remain blood brothers to debt, congenitally incapable
of running our economy, other than into the ground.