The Price of Debt

It is sobering to look at the figures for the interest the U.K. government now has to pay out of taxes to cover the national debt. This debt pile grows by the second and will continue to do so until the budget is brought into balance. We are now paying over £40 billion per year and this is set to rise soon to £50 billion. This is more than the whole defence  budget and nearly half the NHS. This first demand on the income of the nation, which grows day by day, is the reason why it is imperative to cut the deficit as quickly as possible, rather than at a pace which is less painful.

We can see what happens if nothing is done. The bill becomes so big that it becomes too much to pay and the resultant retraction of the economy ensures that it can never be paid. This is why Greece is where it is. The fact that, when setting up the Euro, its founders baulked at the controversy of how to govern a common economic policy to support the common currency, is why the Euro zone is in its current crisis.

This is why we did not join the Euro. The flaw was there from the start, clear for all those who looked, to see. It is also why, after the post war experience and the IMF humiliation of the nineteen seventies, a more cautious approach to government borrowing prevailed in the UK. Labour needs to remind itself of that, as do the unions. Emotion is easy to inflame, but in the end it all comes down to the money. At the moment that money just is not there.It is on its way to pay for past follies. Demanding another folly will not help.