Brian Monteith: The UK's public finances are no longer in deficit

While the SNP has invented an emergency that requires a Bill to be rushed through Holyrood '“ when there has been a real emergency that has frozen the nation, showing both its competence and understanding of people's everyday needs is wanting '“ an important event happened that has probably passed most people by.

Chancellor Philip Hammond should reward us with a cut in the rate of VAT
Chancellor Philip Hammond should reward us with a cut in the rate of VAT

The UK’s public finances are no longer in deficit on the current account – as of January year-on-year it is in surplus for the first time since (drum-roll) two-thousand-and – two.

This is highly significant. It deserves Hosannas, if anyone could climb high enough in their crampons to sing them.

Sign up to our Politics newsletter

Unfortunately, although understandably, we, and our politicians, are too preoccupied with other things. On this occasion I shan’t complain too much but try and argue why it deserves more recognition and praise.

Firstly though, a few words of caution. That the country is raising more revenue than what we are doling out is a very good thing, but it does not include capital expenditure, so I’m afraid it’s only two cheers, not three. We still have a structural deficit, whereby our commitments are greater than what we might normally expect to receive, and removing that must remain the target.

Secondly, as this good news is the first time in as long as it takes a new-born to gain the right to vote in Scottish Parliament elections it cannot yet be called a trend – just a straw in the wind. Nevertheless, there has been a marked trend of growing receipts so we must hope for and work to this improvement becoming reliable to the point where it includes capital expenditure too and we can begin to pay down our national debt.

Reducing national debt is important because the interest on it is larger than what we spend on schools and defence. Reduce the debt and we reduce the interest – which is just giving money away but is literally thieving from our children and grandchildren as they had no say in the commitment.

Moving into a small but tangible current account surplus should also be given particular recognition for it has been achieved at a time when receipts from oil revenues have fallen through the seabed and after decommissioning offsets are in the red. Furthermore we were told by no less than HM Treasury itself, the Bank of England, the IMF, OECD and countless know-it-all analysts gorging from the same trough of false assumptions, to expect an immediate recession due to the existential threat of voting to leave the EU.

The BBC cliché “despite Brexit” is becoming risible.

There have of course been bumps along the way – such as two slumps in the eurozone – and there may yet be more to come, such as a run on Italian banks due to their EU supported debt levels, but we should be thankful how resilient the UK economy has shown itself to be. We are currently enjoying record or near record figures for high employment, low unemployment, continued high foreign investment levels, burgeoning order books, rising confidence in most business sectors, booming manufacturing exports etc.

Only last week Toyota – despite the unknown outcome of the Brexit negotiations – confirmed it would be building its new Auris model in the UK and increasing engine production, safeguarding 3,000 Derbyshire jobs.

Despite all of this good news there can be no doubt that it is in the interest of too many politicians to talk our country down.

Some say that whatever is wrong with Scotland’s economy is England’s fault – when the majority of English regions are in many economic statistics actually performing worse than Scotland yet do not enjoy the same scale of fiscal transfer to offset the pain. Others say that “the many” are suffering under “Tory austerity” for the benefit of “the few” when patently the figures show that the richest section of society are now paying a greater share of taxes than before. Also, thanks to rising tax thresholds that took £4 million out of income tax altogether, the creation of millions of jobs and rising earnings, the majority – a group larger than the many – are able to say they are at least getting by.

Unfortunately for the UK government, the political discourse remains caught in a time warp where the language of austerity dominates despite a trend growth in public spending. I agree with Scottish economist Ewen Stewart of Walbrook Economics who has argued persistently and persuasively that what the UK experienced was “Partial Austerity” in other words austerity applied to certain government departments, with those such as health, schools and overseas aid all protected from what in many other cases resulted in budget cuts of 25 per cent.

Likewise, allowing for inflation, social welfare spending has risen by £150 billion over the government’s term of office – hardly the full-on austerity endured by Greece or Ireland where benefits and public sector pay was cut, often by 10 per cent or more, and tens of thousands were made unemployed.

The perceived age of public austerity is over; yes there are still food banks (which like charity shops I expect will now always be with us no matter how affluent we become because we are a compassionate people) and yes there will still be cuts in various public services – necessitated by changing demographics and the need to allocate funds to services that we decide are of higher priority.

Spending is, however, on the increase – that is an undeniable fact; so long as we see receipts being greater than spending growth we can turn to tackling the debt. We cannot, however slacken our constant review of spending nor can we abandon prudence – for the poorest will ultimately be the losers.

Resorting to Corbynism would be a catastrophic error, simply adding even more debt just when we are getting to the point of recovery – at a time when interest rates might rise – making debt a larger problem.

I remain of the view that until the chancellor takes steps to reward people for their sacrifices of the past eight years by cutting VAT – as the finances can allow – the Corbynist disconnect between economic perception and reality will continue.

If greater social harmony is to be achieved the perceived divisive gulf between those sharing in the country’s success must be remedied. The government must have an economic plan to convince more people they are benefitting from their endurance; reducing VAT is the answer.

l Brian Monteith is a director of Global Britain