Last week I retweeted Johann Hari's piece "The Biggest Lie in British Politics" - he says that the commonly-accepted idea that the UK's national debt is massive and troublesome is basically a bare-faced lie. But since then I've decided he's wrong, and here's why:
Firstly, is the debt big? Hari says:
Lets start with a fact that should be on billboards across the land. As a proportion of GDP, Britains national debt has been higher than it is now for 200 of the past 250 years. Read that sentence again. Check it on any graph by any historian.
He's right - you can check it on any graph such as this chart of UK national debt since 1692. But why was it so high in the past? Look at the graph for 1900 up to the present day and it becomes obvious. The first world war, then the second world war, triggered massive massive leaps in national debt which took decades to come back down.
For the pre-1900 data, apparently the peaks were related to other wars such as the Napoleonic wars, but frankly I think if we go back beyond 1900 the relevance really diminishes - after all, Britain had an empire, financial markets were very different, etc etc.
So the UK national debt is currently above 50% of GDP. It was below 50% from 1888 through to 1915, and then also from 1973 through to 2009. The big spike up in 2009/2010 is clearly visible on the graph, and is clearly quite a difference from what's been happening over the past 40 years.
Secondly, is the debt bigger than other countries'? Hari says:
it is not high by international standards. For example, Japans national debt is three times bigger than ours, and they are still borrowing at good rates.
That "for example" is a naughty little weasel-word. Japan is not an "example", it's an outlier - Japan has had a worryingly big national debt for a long time, supported in part by the Japanese people's tendency to save more, but still a cause for concern in Japan. If you look at the list of sovereign states by public debt you can see Japan topping out that list, with a national debt bigger (in proportion) than everyone, including badly-broken Zimbabwe's economy.
Personally, I would like to compare the UK against other states where the comparison feels similar, which to me generally means Western Europe. So which of those countries have a higher national debt than us? Well: Greece, Italy, Belgium, Ireland -- oh dear, this is not looking particularly reassuring!
But then: France and Germany - they both have larger national debt than the UK (at least according to the 2010 figures I'm looking at). Is there anyone here who thinks France and Germany are dodgy financial examples?
So I think Johann Hari is behaving particularly weaselly in using Japan as a "for example". The UK's national debt is indeed higher than quite a lot of other nations - but it's not freakishly high. However, the historical data I mentioned above show that the banking crisis has affected our national debt in a way that probably does imply some measures need to be taken -- I know -- what about a robin hood tax?
If you're reading this you might wonder if I now agree with the Tory / Lib Dem cuts agenda, since I think Johann Hari's position is wrong. Well I don't: cutting savagely and fast seems to me most likely to harm the chances of a smooth recovery, and I believe they're cutting so fast for two reasons: (1) they have the rhetorical momentum right now to cut whatever they want, it's harder to argue against a single cut when there are dozens more happening at the same time; and (2) they're trying to get it out of the way fast so that the public forgets by the time of the next general election. (Why else front-load such a massive portion of the cuts into the first year?)