Don’t Let’s Rob Our Grandchildren!
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It is not often that somebody writes something with which I totally, one hundred per cent disagree. But writing in the Times, Chris Dillow has done just that. Dillow attempted to defend this government’s plunge into debt, saying that it was quite acceptable for this generation to borrow billions of pounds with which to finance our lifestyle, leaving it to future generations to pay off these debts.
Why? Because, Dillow argues, future generations will be richer than our own, and it is basically OK for the relatively poor to affect a transfer of wealth from the relatively rich.
This is a Robin Hood economic argument that I find utterly immoral. Sure, the idea of taxing one set of people to support another is nothing new. In countries such as Zimbabwe and North Korea money is routinely taken from the poor to support the rich elite. Democracy does not put up with that and votes for the reverse.
So in every true democracy, in every civilized country that I can think of, money is transferred via the tax system from the rich to the poor. Few of us have a problem with the principle, even if the detail can sometimes raise objections. But the point is that in a democracy we have a vote, and a vote gives us a chance to influence events.
There are two things wrong with Dillow’s argument, the first of which is that there is no guarantee that the UK will prosper and generate enough surplus cash to pay off old debts. Admittedly this is unlikely… but what is certain, and this is where I really take issue with Dillow, is the fact that the future generations who will be saddled with these debts have no say in the matter.
Our children and grandchildren have no vote, and those that have not yet been born certainly don’t have one either.
What will these descendants of ours think in ten, twenty and thirty years’ time when they look back at these decades? The Labour government will borrow something like £50bn this year. Will future generations look back and say, ‘That was money well spent. That was invested wisely. Thanks to the money spent back then, we are now benefiting’.
I don’t think so
I can think of circumstances where it is fair for governments to borrow money. The first of these is to defend the nation. The most famous government debt of all was War Loan, issued in 1917 to finance the war effort.
Subsequent generations can hardly object to that, because without it they might never have come into existence. It is also possible to make the case for borrowing if the money raised will be used in such a way as to improve the productivity of the economy. A motorway built today will benefit the country for years to come and so why should those who will enjoy the benefits in the future not pay for it? You could just about make the same argument for schools.
But borrowing is a habit that should be discouraged. It is a slippery slope.
The real scandal of the 10p tax climb-down was not that the Government had to revise its budget. That just made it look stupid. The real scandal is that rather than go back and say, ‘Well if I must give £2.4bn to the 10p tax losers, I must take it from somebody else,’ Darling simply borrowed the money. He borrowed money that will have to be raised from some future generation through the tax system in order to save his party’s political skin.
Given that his promise to ‘balance the budget over the course of the economic cycle’ has not been kept, Gordon Brown perhaps regrets having made it in the first place. But it was at least a good idea in principle.
Governments should live within their means, and if they do so they will at the very least set a good example. If governments resort to borrowing as soon as they find that balancing the books is politically inconvenient then they are hardly in a position to criticise citizens from doing the same.
Far too many people in this country are able to get what they want now, because they borrow money without really knowing how they will pay it back. Some of these chickens are now coming home to roost as bailiffs knock on doors and repossess houses.
Debt is not a good thing. Mr Micawber recognised this. Mrs Thatcher recognised this. Even Gordon Brown paid lip service to the principle of living within one’s means. Debts have to be paid somehow and at some time… and this generation that should take responsibility for its debts, and for making ends meet.
The last thing we should do is to dump the problem upon our children and our children’s children.
Source: Don’t Let’s Rob Our Grandchildren!
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Tags: democracy, economics, Labour Government, politics, UK debt, Uk governmentAbout the Author
Editor of Red Hot Penny Shares, Tom Bulford worked as a fund manager in London and Hong Kong for more than 20 years. Responsible for £2bn of foreign clients' money, he also launched what became Argentina's largest mutual fund.
Now working from his home in Oxfordshire, Tom keeps subscribers up to date with his free small cap market news e-letter, The Penny Sleuth.