Government borrowing is simply a tax on future generations, who have no vote on the matter, argues Brian Monteith
Beware of politicians bearing gifts, especially in the run-up to an election. This may seem such an obvious statement that it hardly needs saying, and yet time and again we, the electorate, are seduced by politicians bribing us with our own money.
Or at least with money that will someday belong to our children, grandchildren and those not yet even a twinkle in their parents’ eyes. For governments have no money and when they live beyond their means they borrow, in the belief that they will pay it back from future revenues. So public borrowing is nothing other than taxation deferred.
It is the postponement of taxation on us, the present day beneficiaries of public services such as health or defence and the growing welfare budget, to a later date as taxes on future generations. Given that these, as yet unidentified taxpayers, are not able to vote and have not consented to paying for our self-indulgence, public borrowing is taxation without representation. It is not an exaggeration to call it generational theft by acts of parliament.
There are times when public debt cannot be avoided and might be considered as practical and prudent, even for those future taxpayers. Examples include in time of war or a major economic catastrophe – such as the collapse of not one but a number of major banks requiring a backer of last resort. But exceptions are, by definition, not the general rule and as such should be thought of as rare and come with a repayment plan.
Thus, we were told by our politicians that when the international debt crisis that begat a general economic recession broke in 2008 the UK’s public debt would climb in the short term but could be expected to then fall. The difference between the political parties on the elimination of the new debt was relatively small, the real question was who we could believe was genuinely committed to such a policy.
Could we believe a Labour Party that had, with conscious intention, delivered a deficit in every year from 2003 – borrowing more from future generations so that the public debt grew before any bank collapsed? Gordon Brown had not cured boom and bust but increased public spending commitments that left us with a structural deficit ensuring debt would climb each year. Why would we expect Labour to mend its ways?
Or could we believe a Conservative Party that had abandoned its core values under the leadership of Cameron and Osborne and rather than criticise deficits and debt was instead talking of “sharing the proceeds” of debt-financed economic growth?
For the record, it should also be remembered that on every occasion that the Labour government delivered an Autumn Statement or an annual Budget speech, the spending commitments being made were never enough for the SNP. If SNP policies had been adopted, the UK deficits would have been greater and the debt even more debilitating.
Looking at the economic problems we faced in 2010 and the subsequent economic shocks, it should have come as no surprise to anyone that Chancellor Osborne missed his original targets to reduce the deficit and resulting total debt.
Now, with a general election fast approaching, we are again faced with the question proffered in 2010 – who can we trust to eliminate the deficit and start to repay all that debt?
Last week Osborne’s Budget suggested the answer must be the Conservative and Liberal Democrat parties, for in discovering that there should be an unexpected improvement in public finances, the coalition government did the moral thing and has used that bonus to pay down the national debt rather than bribe the electorate.
The comparison between George Osborne’s pessimistic Autumn Statement and his upbeat Budget is stark, and it is not a result of electioneering but stems from the independent and objective analysis of the Office of Budget Responsibility (OBR) that Osborne created in 2010. The OBR has been providing figures that guide government economic policy, but crucially it has not always been helpful to the Chancellor. There is now no hiding place from poor economic information and this is all to the good.
It puts in check the ability of many politicians to deceive us with massaged figures and tempers their natural instincts to bribe us with freebies and sweeteners by showing how they will have to be paid for later. Of all George Osborne’s economic reforms – and in reforming pensions, stamp duty and personal tax allowances he can justifiably be judged a reformer – establishing the OBR must rank as one of his most important.
By comparison, the situation at Holyrood is dire. As has been pointed out by Eben Wilson of campaign group TaxpayersScotland, the SNP has no budget line for the provision of a Scottish OBR and so, as more powers for gathering and varying taxes arrive on John Swinney’s desk ,there is no extension of independent scrutiny or analysis to match it. The Auditor General explains in a new report that “it is difficult for the Scottish Parliament, taxpayers and others to get a full picture and understanding about where money is spent and the longer-term implications for public finances”.
After a past year when we have had a Scottish Government White Paper that was a figment of John Swinney’s wishful thinking and big questions remain on how much revenue his business taxes will raise, there is a desperate need for a Scottish OBR. While the UK’s deficit has halved, the Scottish deficit climbs. Yet John Swinney and Nicola Sturgeon support greater public spending through additional borrowing without the permission of those who will end up paying for it. Borrowing not for an economic emergency but because, like at every opportunity before, the SNP wishes to rob the wealth of future generations for the benefit of voters it can bribe now in advance of coming elections.
Where is the morality in advocating such debt financing without the mandate of those who will pay for it? Where are the institutions like an OBR that can help the media and more prudent politicians bring such behaviour to account?
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