POLITICS MATTERS: Dealing with debt will affect us all
My best guess is that the new House of Lords economic affairs committee report, ‘The ‘National Debt: it’s time for tough decisions’, will not be flying off the newsagents’ shelves any time soon. But maybe it should be.
The insightful report is written by members who include a former chancellor, a permanent secretary and two previous Treasury ministers.
The bottom line of the report is that the UK’s national debt crisis is approaching 100 per cent of Gross Domestic Product (GDP).
The inquiry was tasked with answering a simple question: how sustainable is the UK’s debt?
Charles Dickens was spot on in David Copperfield when he wrote: “Annual income 20 pounds, annual expenditure 19 and six, result happiness. Annual income 20 pounds, annual expenditure 20 pounds ought and six, result misery.’
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Does it matter that the UK’s national debt could soon reach 100 per cent of its GDP? Is it just a meaningless number, thrown out by bureaucrats at the Treasury or the Bank of England?
In reality, it means that the UK government owes to investors a sum equal to the entire economy.
James Kirkup, a partner in Apella Advisory, writing in The Times this week, said: ‘Politically, though, it should be no surprise that the stock of debt will get more attention if that symbolic 100 per cent GDP threshold is breached for the first time since the early 1960s, when Britain was still paying off its wartime borrowing.”
The new Labour government will have to face negative trade winds that will add more and more pressures on spending, such as the need to support an ageing population. The war in Ukraine and the financial commitment to NATO are also very necessary, but very expensive, undertakings.
The impending crisis of climate change requires serious and substantial investment in the green transition, particularly for the Highlands. For example, significant infrastructural spending on flood prevention and alleviation are absolutely essential.
There are also international security issues connected with the UK’s debt problem, as more than 25 per cent of that debt is held by investors outside Britain.
Could foreign governments use gilts (government bonds) as economic tools against Britain?
To add pressure to Labour chancellor Rachel Reeves, the Organisation for Economic Cooperation and Development (OECD) warned of the UK’s unsustainable debt trajectory prior to next month’s budget.
The OECD called for a number of steps, such as unfreezing fuel duty and the scaling back of the triple lock on state pensions, which would be deeply unpopular.
About 9p in every £1 the government spends will be on debt interest costs over the next five years.
The chancellor will be aiming to avoid a situation where debt is unsustainable and where interest payments exceed the country’s growth rate.
Rachel Reeves has been in post for a very short time, but political commentators and the public will be waiting to see if the new budget will keep the Dickens theme – full of Great Expectations or a touch of Bleak House.
Elsewhere, congratulations to Caley Thistle Supporters’ Trust for rolling up their collective sleeves to paint and decorate the Sports Bar at the stadium before today’s game with Cove Rangers.
It may seem a small step, but it is a mark of the sea-change at the club. Former ICT chairman Alan Savage has done an excellent job steadying the ship with the first class appointment of Charlie Christie as acting chief executive.
Significant shareholders – David Sutherland, David Cameron, Ross Morrison – have all rallied to the flag, with strong support from interim ICT board chairman Panos Thomas.
It has been a relentlessly grim few months for all Caley Thistle fans but, as they say, it is always darkest before the dawn.
