Cutting public spending may not reduce debt

The Tory economic case is simple: Britain’s national debt is too high, paying it off is a priority, and the way to do that is to cut public expenditure, and then cut it some more. If we are unlucky enough to be landed with a Tory government at the next election, then that is the medicine we are going to be forced to take.

At first sight it looks like common sense. After all, if we allowed our overdraft to get out of control, the rational thing to do is cut back on some of our spending. But running a national economy is not the same thing at all as running a household budget.

There was a very interesting letter in Wednesday’s Guardian (3 March) from a group of influential economic historians who challenge some of these common-sense myths.

They argue that, “British public debt is not high by the standards of the past 200 years”. There have been long periods when our debt burden has been far higher than today.

They also observe that our debt is low in comparison to many of our competitors; “…only Germany and Canada’s are lower among the larger industrialised powers”.

And they argue that it is economic growth that is the key to paying off debt, which is exactly how Britain paid off previous high debts in the post-war period and earlier.

A strategy for growth does not start with massive cuts in public spending. That would guarantee a slow, sluggish recovery or even risk a new and damaging recession. Cutting investment and taking money out of the economy would be the quickest way to guarantee that a debt problem turned into a real crisis.

When we oppose cuts and support keeping our public services alive we are also promoting a rational economic policy that has the lessons of history in its favour.