I ask this because the current Conservative government expects to eliminate the budget deficit by the middle of the next decade. So, the deficit reduction programme, which has been in place since 2010, will continue into the 2020’s. But should it? Are balanced budgets necessary to achieve sustainability in the public finances?
The political realm is luxuriant with lies. And the biggest lie which, over the last decade, has dominated public discourse more than any other is the lie that the last Labour government mismanaged the economy and caused a recession.
Contrary to what many politicians may tell you, Labour’s fiscal policy decisions did not cause the economic crisis. There was no reckless spending or profligacy. It’s worrying to see how this lie has become accepted as conventional wisdom, for two reasons. First, it gives a false explanation as to how the crisis came to be. And, second, as a result of this false explanation, it has enabled the Tories’ to justify their unnecessary austerity programme, which has resulted in real-word damaging consequences. That is why it is important to expose this myth.
Few aspects of our economy are as gravely misunderstood among politicians, media pundits and the general public as our public finances. Indeed, public discourse on the national debt is luxuriant with myths and fallacies. This piece offers a rebuttal to three widely held beliefs regarding public debt which, I hope, will lead to greater honesty in discussions, and debates, on the state’s finances.