The Great Tory Lie, and the Truth Behind the National Debt

Every pronouncement by ministers in this government contains the same excuse for every unpleasant policy and every perfidious financial  act. The mantra goes like this; “we have to repay the debt created by Gordon Brown”, and: “we inherited this mess from the incompetent Labour government which came before us”. These statements are repeated time and time again and have now become almost an act of faith and are widely believed by the general public and their coalition partners. The fact that both statements are in fact lies is now hidden by repetition.


Like all such slogans this one has become so familiar that nobody seems to be questioning it any more. People on the street even acknowledge that “we have to repay the debt.” The word austerity is banded around by these schoolboy politicians who have no experience of real austerity and no clear idea what the word really means.  Our dear Prime Minister even tells us that it could go on for 10 years, a hopelessly negative and miserable pronouncement, but take it seriously for that may be an underestimate. Such dire warnings of the future are always coupled with remarks about the serious overspending and irresponsible behaviour of the Gordon Brown government.

In fact the Labour governments of Blair and Brown were quite prudent and on any measure the level of government borrowing was always manageable.  In general the golden rule of borrowing to finance investment in Britain was adhered to.  The financial crisis of 2008 was a world economic event which affected many countries in many ways, and we with out huge financial sector more than most.  Added to which we had created a mountain of private debt backed by business and domestic assets.

The problem was and still is that those assets are hugely over-valued – property, businesses and all associated financial instruments. On those inflated asset values was grown a huge bubble of debt much of which was used for consumption. On top of that were a great array of dud  ‘financial products’ not to mention criminal interference with markets. When the bubble burst the financial institutions claimed that they were either too big or too important to fail.  So on both sides of the Atlantic money was poured into the banks to replace the gap in balance sheets caused by the lost asset values.

It is a matter of demonstrable fact that Brown and Darling acted with commendable speed and intelligence to support financial institutions which were about to fail.  They were really given only one solution to the problem by their advisers, mostly bankers themselves.  They had to borrow and create liquidity to bail out the failing banks and that raised the public debt.

They were beguiled by the managers and owners of all the financial institutions.  The money they and this government created has been used to pay for the over valued assets.  They said they needed to “rebuild their balance sheets”.  What really happened in Europe and America was that government borrowing replaced the extravagant borrowing of the institutions.  Those governments are now forcing ordinary people to pay off the consequent vast debts.  The truth is that the debt thus created has been of little or no use to the ordinary man.  The money has been swallowed by the banks.

The result is government sponsored theft on a grand scale.   The livelihood of ordinary voters is being degraded while we all make sacrifices to ‘pay off the debt’.  Only we do not all pay.  Those who caused this disaster are still in post,  earning huge salaries and bonuses.  The big boys even have the gall to have the tax system fixed in their favour.   All the institutions and beneficial organisations which had become the proper right of the people are being dismantled before our very eyes.  From the National Health Service to our local library they are taking it all away.  And the reason they say is to pay off the debt of the wicked Labour government.  But that is a lie.

The fact that the two statements quoted above are questionable has now ceased to be noticed. The need to repay the consequential debt is argued with such fanciful statements along the lines of: “our grandchildren will inherit thousands of pounds of debt”  and “the interest charges on the debt will impoverish future generations”. George Osborne argues as if the national economy were merely a large version of domestic household accounting.

This is  ridiculous. Government debt has existed since the time of  King George the Third. Every so often politicians get a little bit upset about it and try to reduce it. It has never been paid off and we can live with it for ever.

The whole point about public debt is that it is mainly owed to us. In all sorts of ways through many financial instruments, the British people actually owe themselves the national debt. The interest that we pay on it is paid largely to us. That interest payment helps to bolster our pension funds and provides income for those with government investments. To represent the annual expenditure on interest payments as in some way being a waste is a complete misunderstanding of the way in which financial markets actually operate.  it is another lie.

Of course it is not a good idea to run the government at a loss from one year to another. But since over a third of government spending is the transfer of cash within the economy to finance pensions, unemployment and inflated housing costs, a direct attack on government spending is an attack on us all for the benefit of those who already have more money than they could ever spend. In so far as there should be a reasonable balance between government income and expenditure, there may be times when more cash is required and in those cases the public debt has to increase.  At other times, for instance when the economy really grows, tax income increases and the books go into credit.  The truth is that we do not have to pay off the long term consolidated debt.

While in the short term the policies of Brown and Darling were both timely and effective, they were acting as a sort of financial fire brigade. Having decided to prop up the banking system  they could do nothing but hand them the money.  However, I doubt very much that they would have gone on to dismantle modern Britain.  (Incidentally it is a measure of the success of the Great Tory Lie that Ed Balls dare not say openly that he would borrow to grow.)

The existence of a large public debt is no disgrace and no restriction to a healthy growing economy. To compare our public debt to the annual national income, as is done by George Osborne, is about as useful as an individual householder comparing his mortgage to his annual income. The former will be many times the latter and yet an individual is satisfied to continue to pay the interest on the debt. In this respect the public finances are indeed a little  like a private household.  But to assert that living in debt is somehow morally wrong when our whole economy is based on the ability to cash in today’s economic gains to invest in tomorrow.  It is not about morals for it is another lie.

The big difference between private and public finance is that much public expenditure actually fuels and encourages economic growth whereas private expenditure adds to consumption.

At the root of the current lack of debate about economic policy is this continual repetition  by Osborne and his cronies that we have to pay off the debt. In the past Britain has run a debt many times  larger. Attempting to pay off parts of the national debt by direct action on expenditure and taxation is rather like trying for liftoff by pulling at one’s own shoelaces.

It is a truth currently not acknowledged that economic growth demands sufficient cash to convert technological progress into benefits for the wider community.  In all avenues of business activity surpluses have to be recycled back as investment and only by a healthy flow of cash is this possible.  If everybody hoards their cash against the possibility of loss and banks turn into pawn shops there will be no growth, in fact there will be decline.

The current balance of government spending can only be brought back into credit by creating surpluses in all areas of economic activity.  You do not do that by starving the economic body of cash.  Rather you increase borrowing either voluntarily or by compulsion and investing in people.  The present policy of cuts followed by cuts not only makes our lives poorer, it is a self defeating spiral downwards to oblivion.

No government will ever survive with two and a half million unemployed and another million on part time work.  The only reason there is no trouble now is the big tory lie.  It is so effective because the implication is that it is our fault and governments can survive and prosper on a mass guilty complex.  They even use the lie to attack pensions and  benefits.  To argue that we, the fifth richest country on the planet cannot afford decent benefits ,as the Tories do, is the politics of the workhouse.

So we have to ask ourselves why the lies.  They are to  justify the policy which will fail as any third year student of economics would know.  But the failure may happen after all the damage has been done and that is the point.  Cameron and Osborne do not care if it fails.  As Polly Toynbee keeps reminding us, this is an attack on the whole of British society and all we value from our culture to our countryside.

Like all crimes you have to look for the motive. The Tories believe that this is the one chance to dismantle the hated institutions of the social democratic settlement.  Thatcher was bad, but she never dared to go this far and actually destroy the fundamental public support by government for the health, education and welfare of its people. The Torys need the lies to drag the well-meaning Liberals along as they dismantle our social democracy under the eyes of a compliant electorate. Above all they need the lies to make the people compliant and docile and in that they have succeeded in spades.

Next, we have to identify these who will gain from mass privatisation.  Who will gain from the policy of protecting the banks and making us pay the debts which will take from the rest of us the benefits of progress. The very rich now constitute a substantial interest group which is trans-national and of every faith and philosophy.  They are united by only one thing – wealth.  Soon they will be in a position to command the world without inconvenient  politics.

The rich need the law and they need international and national institutions to uphold it.  But they do not need interfering governments and soon they will be able to afford their own police and armies..  They are determined to undo all the institutions of health, welfare, education, culture and human rights which should be provided for the citizens by right and all will be on sale from corporations which they own.  They want to make us all dependent on them for everything and their main weapon is oil.  In Britain now their loyal servant is the Conservative Party.

As we celebrate the novels of George Orwell we should recognise that Big Brother will never emerge from the Far Left.  We would be looking in the wrong direction.  He will emerge from the corporate clique who will attempt to own us and profit from our needs and wants.  We know how electorates can be manipulated by retaining obsolete and biased electoral systems.  They can also be deceived by a big lie..

Who really gains from the lies right now?  The answer is the Conservative Party.  The super rich and their corporations are conspicuous donors to the Conservative Party. The Cameron clique have truly come down from the mountain having seen the world which they are invited to command.  All they have to do is to take everything away from the people and do the bidding of  their paymasters. Cameron and his cronies are here to establish a market based social system which leaves the wealthy in permanent command.  They will then retire to join their erstwhile masters.


Future articles in this series will look at Markets, Public Ownership, Government Statistics, Defense Spending.

About Richard Graham



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