There’s a very interesting article over on the New Statesman website. George Eaton writes on his interview with Ed Davey.
The article covers a variety of fascinating topics – how many seats the LibDems will win the general election, working with other parties, the chances of Reform UK, Keir Starmer, John Rawls, the Orange Book, the Post Office scandal, and where the LibDems sit on the political spectrum:
“We are the party that wants to change the system,” he said in reference to policies such as electoral reform and a written constitution. “Labour has centralising tendencies – we don’t. We want to empower communities, devolve power. Labour sometimes says that but it hasn’t tended to do it.”
In a recent New Statesman column, David Gauke, the former Conservative cabinet minister, suggested that the political opportunity for the Lib Dems lies in supplanting the Tories as the natural home of the centre right – a path that Davey also rejected. “I’m not a centre-right politician, never have been,” he said, adding that he still identifies with the centre left.
For Ed Davey, the Lib Dems are neither a Labour adjunct, nor a Tory surrogate, but something altogether more distinctive. “It will be the Liberal Democrats who decide where we are. Having been in the party many years, married a Liberal Democrat and now leading the party, I know where our heart is, our philosophy is, our ideology is – and it’s not on the centre right.”
You can read the full article here.
* News Meerkat - keeping a look-out for Liberal Democrat news. Meerkat photo by Paul Walter
Follow @libdemvoice.org on Bluesky
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
Weekly Road Report - West End Ward #dundeewestend
An unholy alliance?
Public opinion in turbulent times: Neville Chamberlain's approval ratings - The Week in Polls
How Multi-Academy Trusts have diverted education funds into executive salaries
Tens of Thousands
Mark Paine
expats
Mick Taylor
Thelma Davies
Joseph Bourke
47 Comments
Ed is perhaps the only party leader who allows the word ideology to pass his lips with credibility and without a sneer. This is consistent with his affirmation of support for John Rawls’s philosophy. For the practical application of Rawls’ insights I would love to see more Lib Dems reading Daniel Chandler’s “Free and Equal” before we get into the confusions, distortions and sheer nastiness which promise to be front and centre of the General Election endgame.
I am very glad to hear that The Libdems are not fighting Labour – I just wish someone would tell Our London Team – their constant attacks on The Labour Mayor are hard to tell apart from Tory attacks. I don’t get this as a Strategy.
I want to see us supplanting The Conservatives as The Official Opposition but that does create dangers down the line – that Moderate Tories might want to join, without becoming Liberals. We need to be more Ideological & promote Our Values to Members, New & Old.
It is welcome that Ed Davey does provide a clue of his political foundations, when he cites the political philosopher, John Rawls:
Even so when Ed refers to being “distinctive” and “where we are” it is not so clear what he means.
Personally I think JS Mill gives a harder edge to modern Liberalism, but I regard Rawls and Mill as complementary: Rawls ‘ approach is deontological whereas Mill is consequentialist.
Those are nice words but the reality is that Labour most definitely are fighting the Lib Dems. It has clear over the last few years that Labour’s primary goal has been to prevent other opposition parties from winning seats (even if that meant the Conservatives won them instead), so that they could acheive their secondary goal of being positioned as “the only real alternative” when the public inevitably got fed up with the Conservatives.
I agree with Paul Barker. The attacks on Sadiq Khan by the Lib Dem London campaign are a poor substitute for the promotion of a Liberal message.
We are nearly in April and we haven’t seen a manifesto.
I was hopeful of some more Assembly seats this time but things need to change quickly if that is going to happen.
As a left of centre party somewhere between Labour and the Greens the libdems are likely to pick up 22 seats in the upcoming general election. David Gaulke is right to state that the Centre right is where there’s a gap in the market. If the libdems had any sense they’d occupy it. Finding a policy that will differentiate it from the other left of centre parties will become more difficult. Without Iraq war and Brexit it seems increasingly that there is little reason to vote libdem and alienating the centre right seems like a bad move.
Sadie Khan is not a good mayor and has made many mistakes. As an opposition party we are right to point them out. There is a manifesto and Rob Blackie has a definite programme. The disarray of London Tories gives us an opportunity and Rob is rightly exploiting it
Our realistic ambition in the London elections is to increase our representation on the assembly and provide effective scrutiny of Sadiq Khan. Our pitch should reflect this. It should concentrate on the many areas that the mayor has failed to achieve objectives we agree with.
Its not criticism of Khan that I object to, its the tone & the lack of attention to the context of a Government which constantly tries to undermine everything he tries to do.
Just a quick point on Russell,s point about Us getting 22 Seats in the coming Election – this is from an MRP by “Best for Britain” – its nonsense. No-one else is suggesting less than 40 Seats for Us. The figure of 40 for the SNP also looks very out of line.
If “Lib Dems and Labour aren’t fighting each other” what is the point standing opposing candidates? This just spits the vote and/or wastes £ thousands in lost deposits.
To take the argument one step further why even bother to have separate parties?
” I know where our heart is, our philosophy is, our ideology is – and it’s not on the centre right.”
It was, though, at the last election according to the Political Compass. I haven’t noticed even any slight shift to the left since.
https://www.politicalcompass.org/uk2019
@Russell
You need to learn to take MRP polls with a pinch of salt, just like regular opinion polls from pollsters who have never been tested by how well their poll predictions match real votes in real ballot boxes. Even YouGov underestimated by 26 the number of seats that the Tories would win in 2019, despite polling over 100,000 adults in the week before the election.
@Peter Martin
What exactly is that political compass rating based off of? Theres no info to indicate that this scoring is down to any kind of objective analysis, and if it were then they’d have to refute the political compass test that Thier site is best known for, since taking that test as a hypothetical generic believer in our 2019 manifesto wouldn’t place you anywhere near that far to the right. And Ranking labour (even under Corbyn) to the left of the greens and placing the Brexit party in neo Nazi territory is flat out objectively false.
The whole site including their fabled test quite frankly is a load of garbage and is very clearly not the work of a serious political scientist but a very left wing individual who lacks the mental capacity to see beyond their own bias and produce something objective and useful.
@Pater Martin – I’m not sure I’d rely on Political Compass who define us on that graph as more authoritarian than Labour or the SNP! Reading the text of the accompanying article this seems to be based on the ” authoritarian policy of revoking Brexit without a referendum”. Yes, well, not our finest hour, but hardly representative of the ethos of the party.
@Geoff Reid – “Free and Equal” waiting to be read after I’ve finished “Five Times Faster” by Simon Sharpe on the need to act quicker and with a different economics. It would be good to hear more clarity that we do not accept the neoliberal norm that Labour seems to have fully surrendered to.
@ David and Nigel,
I can appreciate you don’t like being classed as centre right but this doesn’t mean the Political compass is incorrectly calibrated. All parties have shifted to the right since Thatchers time. The Corbyn leadership tried to push Labour back closer to where it used to be but even so the policies wouldn’t have been considered extreme in many European countries.
Nigel concentrates on the authoritarian axis. The criticism of Corbyn was that he wasn’t authoritarian enough. He could well have removed the whip from many right wing MPs who made no secret of plotting against him and expressing support for other parties. Starmer has no such scruples when it come to purging the left!
It’s easier with the economic axis. IMO. The Lib Dem manifesto was possibly the most neoliberal of all!
I often disagree with Richard Murphy but has a point with:
https://www.taxresearch.org.uk/Blog/2019/11/17/the-libdems-are-promoting-the-most-hard-right-neoliberal-callously-indifferent-economic-agenda-of-any-mainstream-party-in-this-election/
This party hasn’t ‘shifted to the right since Thatcher’, Peter Martin, and as a life-long centre-left Liberal I both agree with Ed Davey’s stated stance in the article and also believe the bulk of our party is of this view. There has been strong rebuttal of the austerity programme of the Coalition, and the radical left-wing tendency of our party can be seen in the radical economic policies agreed at our Federal Conferences. What I and others do complain of in our party, however, is a certain timidity shown by the leadership in not proclaiming them, and we hope better of our 2024 Manifesto.
As for the Labour Party, there will inevitably be a time in their government when we will oppose them, because as Ed Davey says we are distinct from them. It is unlikely however that we will be able to replace them, or the Conservatives either, so the country needs the fairer voting system required to allow the voters real choices.
I generally do not regard Richard Murphy as a credible source, but the article @Peter Martin links to is utterly ridiculous. The headline refers to the LibDems as hard-right, neoliberal, callously indifferent, which is already implausible, and when you read the text you discover the sole basis for this assertion is a speech by Ed Davey promising to – for all practical purposes, lower the national debt, at least as far as current (non-capital) spending is concerned, by raising more in taxes than the Government will spend (excluding investment). I’m sure lots of people who are not remotely ‘neoliberal’ or ‘far-right’ would regard that as a good idea, considering how much Government expenditure just gets eaten up by paying interest on the national debt. Richard says nothing about the LibDems’ attitude towards markets or free trade or reducing taxes or deregulation, which are the usual things that you’d normally associate with ‘neoliberalism’. The logic is just something like, Ed Davey wants to reduce the national debt. Therefore the LibDems are hard right.
Not only that but, Richard Murphy then goes on to attribute to the LibDems lots of bad things that Ed Davey didn’t even say in the quoted speech.
Like I said, an utterly absurd article, which in my mind only goes to confirm my existing view that Richard Murphy is not someone worth taking seriously .
It’s interesting to reflect on the stances the party has taken during times of Labour Governments. We were to their left in 1964-70 and 1997-2010. In 1974 Labour started off on the left but then economic chaos took over and the Lib-Lab pact was just a stalemate. There won’t be much room on the centre right this time round because that’s where Starmer & Co will be. I hope our party can develop a distinctive stance in defence of liberal democracy against attacks from a resurgent hard right Tory party and an authoritarianLabour party.
@ Katharine @ Simon R,
“Ed Davey wants to reduce the national debt. Therefore the LibDems are hard right.”
It sounds rather stark when you put it like this but I’ve always made the same criticism of the EU’s economic policy. This is hard right in an economic sense too. It works fine for the most powerful economies which have the economic muscle to ensure they run a large surplus in their exports but it’s a disaster for others who are forced by the arithmetic of trade and currency flows to run counterbalancing debts and deficits.
So Ed Davey can’t have it both ways. He can’t advocate neoliberal economics and not be a neoliberal at the same time.
The correct approach is to regard the debts of Governments as the savings of the rest of us. One is just the mirror image of the other.
Karl Marx also wanted to reduce the national debt.
It is very hard to believe the polling in the weekends analysis, ie Labour get 468 seats etc.
Looking at the spreadsheet is is remarkable that its percentages are so out of line with the You Gov one completed a couple of months ago.
Unfortunately Labour will use this against us. Seats where the You Gov poll said we were leading with 35% plus of the vote have mysteriously dropped to 15 – 18%.
Brighton Pavillion: You Gov had the Greens well ahead this one has them well behind and so on. I guess it can depend on the question asked.
I also doubt the rational of “Best for Britain”, it seems to have an agenda very much in favour of pushing Labour albeit in a very subtle manner.
Ironically I see that the web site “Left forward” recently had the Tories at 14 seats
Liz Truss didn’t seem remotely interested in reducing the national debt during her brief premiership.
We are the Party of citizen empowerment but we need to show it and consistently. To lay the foundation we need to refocus on education. A more educated electorate would make many of our policies more credible. We need a more radical educational policy especially around what is relevant to pupils and students in the era of AI and online learning. It’s to do as much with knowing where to find information, how to determine its validity and a love of learning as what is actually learnt.
Yes it would be good if everyone were more educated. Libdems could help by explaining what the National debt actually is. There are some very strange ideas about that. Such as that the govetnment is in hoc to the IMF to the tune of £2 + trillion.
The fact is that anyone owning Government securities such as bonds (even indirectly though commercial bank deposits or a pension scheme) and even Premium bonds owns part of the National Debt. So whereas a call to reduce the National Debt may sound good to those who don’t know what it means, it sounds less good to those whose savings are being reduced.
Of course, the way to do this is to make everyone much poorer and so less able to save. It’s called austerity economics.
Peter, were you heartened by what Rachel Reeves had to say in her Mais lecture, which I read about through Will Hutton’s Observer report? It sounded as if the Labour and Liberal Democrat economic policies may actually be converging, both rejecting neo-liberal economics, which would seemingly be good.
@ Katharine,
I haven’t so far been heartened by anything that Rachel Reeves has said. Will Hutton, I would guess, has been disheartened with the “continuity Hunt” description of her policies and is doing his best to find grounds for a more optimistic assessment.
But is he just making it up? For example he writes:
“She singled out Thatcher’s election in 1979 not to admire it, but to acknowledge that, although intellectually, economically and socially wrong, it had represented an inflection moment in a period of economic and social upheaval, when one set of ideas – postwar Keynesianism – was exhausted and gave way to another.”
I can’t find any reference to Thatcher, the 1979 election, or any such acknowledgements from RR in her 2024 Mais lecture. Maybe I just missed it? If so perhaps you could help me out.
It was economically wrong but neither WH nor RR have ever , to my knowledge, explained just why this was the case. It may not have been perfect but there wasn’t much wrong with the Keynesianism of the time. However, when the rise in oil prices triggered off an inflationary spiral those who opposed the theory, for purely ideological reasons, took their opportunity to junk it.
But, as we have just seen, if the price of commodities rise there are going to be price rises regardless of economic orthodoxy which prevails at the time. We are always going to have neo-liberal politicians unless and until they openly break with the established and prevailing theory of monetarism.
Ed Davey’s identifying with the liberal philosophy of the John Rawls explains the party’s obsession with ‘fairness’ and having the word ‘fair’ included in so many of our policy papers. Fairness is defined differently by different people and so as part of a political slogan it has no true meaning.
Russell,
We tried being a centre right party between 2010 and 2015 and it nearly led to our wipe out. There is not much of a gap between Labour and the Tories.
Peter Martin,
I see that the Richard Murphy article you link to is about a speech by Ed Davey. It does raise the question what he learned while studying economics (I assume a third of his degree). I would not support either of the two planks Ed set out. The budget should nearly balance over the economic cycle and government investment should not be judged on whether it generates more income for the government, but on whether it benefits the country or is good for the economy or both.
Our 2019 manifesto states we would spend £130 billion on infrastructure, including homes (300,000 new homes a year of which 100,000 would be social homes and the insulation of all homes by 2030). We would have £50 billion of new money for regional investment. The only fiscal rule I could see was that national debt declines as a share of national income. With £130 of investment economic growth should have done this.
Peter Martin,
Will Hutton stated that “Far from sticking to Hunt’s fiscal rules, she (Rachel Reeves) would change them to promote a surge in public investment. Rather than aim to balance all public spending and revenues year by year, she would strip public investment out of the equation and only aim to balance “day to day” spending and revenues over the economic cycle.” https://www.theguardian.com/commentisfree/2024/mar/24/for-the-birds-rachel-reeves-has-outlined-a-plan-to-give-britain-liftoff
I can’t find where she said this. All I could find was “So let me be clear about the rules which will bind the next Labour government. That the current budget must move into balance, so that day-to-day costs are met by revenues. And that debt must be falling as a share of the economy by the fifth year of the forecast, creating the space to respond to future crises.” https://labour.org.uk/updates/press-releases/rachel-reeves-mais-lecture/
Alex Macfie 1st Apr ’24 – 11:44am:
Liz Truss didn’t seem remotely interested in reducing the national debt during her brief premiership.
Reducing debt as a proportion of GDP was a key committment in The Growth Plan…
‘The Growth Plan 2022’ [23rd. September 2022]:
https://www.gov.uk/government/publications/the-growth-plan-2022-documents/the-growth-plan-2022-html
Peter Martin 2nd Apr ’24 – 1:49pm:
I haven’t so far been heartened by anything that Rachel Reeves has said.
Surely Reeves channelling Thatcher and Truss with supply-side reform is enough to get any Labour supporter fired up with enthusiasm and raring to get their feet on the street delivering leaflets for the cause?
I can’t find any reference to Thatcher, the 1979 election, or any such acknowledgements from RR in her 2024 Mais lecture. Maybe I just missed it?
Here’s Tom Harris, the former Labour MP for Glasgow South…
‘Whisper it, but Labour is now saying that Thatcher and Truss were right’ [March 2024]:
https://www.telegraph.co.uk/news/2024/03/19/labours-new-growth-plan-proves-liz-truss-right/
@ Michael BG,
“The only fiscal rule I could see was that national debt declines as a share of national income. With £130 bn of investment economic growth should have done this.”
Why would you expect this?
The government creates money as it spends and destroys it when it is collected in taxation. The difference between the two numbers is the deficit which represents money which has been saved in one form or another by everyone using the currency and which includes our overseas trading partners.
If everyone decides to save more the deficit will rise. If they decide to save less it will fall. It could go either way irrespective of how well or badly the economy was functioning. For the Nation debt to fall the Govt’s deficit would have to turn into a surplus.
It’s possible but unlikely! IMO.
@ Peter Martin
The problem with postwar Keynesianism, as practised in the UK, was that the trade-off between unemployment and inflation (which in academic terms was assumed to be a stable inverse relationship, as described by the Phillips curve) had been getting worse with each economic cycle since the 1950s. Attempts to “fine-tune” demand so as to dampen the cycles seemed to have the effect of amplifying them.
This was most clearly explained by Labour PM Jim Callaghan in his speech to the 1976 Labour Party conference, who presented his insights almost in Damascene terms.
It was also highly insular in its assumption that Britain alone could fight the global oil shock with an expansionary macro policy rather than prioritising the defeat of inflation. Germany reacted to the same events by recognising the terms-of-trade shock to its national prosperity, and experienced both a much lower peak rate of inflation and a faster recovery of real GDP growth. Moreover, the exchange controls which had been used to limit currency depreciation in earlier times were increasingly obsolete and ineffective in the new world of floating exchange rates and freer capital movements.
Of course there were plenty of problems with the simplistic monetarism which replaced Keynesianism as the new orthodoxy – and indeed with any other economic theory applied to the real-world economy. But let’s not pretend that postwar Keynesianism (still less the whole corporate state model of economic management that went with it) was working just fine if only the pesky oil crisis hadn’t come along to ruin the party.
“For the [national] debt to fall the Govt’s deficit would have to turn into a surplus”
It isn’t necessary for the government to run an actual surplus to reduce debt as a percentage of national income (which is a more relevant metric than the cash stock of debt). A modest amount of annual borrowing has generally been compatible with a falling debt-to-GDP ratio in normal times, provided that the numerator of the ratio (debt) grows more slowly than the denominator (GDP).
The particular difficulty with debt dynamics in recent times has been the steep rise in interest rates and servicing costs, which has caused the debt interest bill to account for a historically high fraction of both GDP and the overall government budget. Indeed, this is the main explanation for the apparent paradox that taxes are so high yet many public services are short of funds.
@ Alex Sabine,
Sure, we had economic problems in the 70s just as we have now and, arguably, they are worse now than they were then. We hadn’t gone through a period of 15 years of little or no growth. Young people had a better chance of finding sufficiently well paid work to be able to afford a decent home. They weren’t reliant on foodbanks. There were fewer homeless on the streets. The NHS didn’t have such long waiting lists. Ambulances generally turned up on time.
So why isn’t there a general clamour to review our existing economic paradigm in the same way there was then? The answer is that the political right, the establishment, the ruling class (call them what you like) don’t have the same ideological objections to so-called monetarism as they did towards Keynesianism.
This is not to say that politicians always made the right economic policy decisions. You can always make the case that fiscal policy should have been tighter than it was. That the unions should have been allowed less political influence. That we should have had a greater tolerance of higher unemployment etc. Incidentally, a big problem was the disparity between North and South. Even in pre Thatcher day the South would be overheating at the same time as the North was starting to thaw -in economic terms.
None of this means there was much wrong with Keynesian theory per se.
@ Alex Sabine,
Of course the arithmetic of debt to GDP ratios dictates that these will fall if GDP rises. The snag is that the neoliberal policies which are applied to try to ensure they fall will be highly unlikely to have the desired effect. GDP is more likely to fall too. We can see this in the peripheral EU/eurozone economies. The harder they try to follow EU fiscal guidelines the more their economies slump!
One beneficial effect of the Covid restrictions was the easing up of the EU’s fiscal rules. So, we don’t hear quite so much of Italy’s, and others, debt crisis as we used to. This has to be a good thing. All we can hope is that the economic apparatchiks in Brussels and Berlin can see the evidence in front of them and won’t start up with their demand for economic austerity once again.
I’m not holding my breath on that though!
@ Alex,
PS. I don’t believe you are correct in saying that the interest bill is at an historic high relative to GDP. A quick Google turns up the figure of 4.4% of GDP.
This is lower than it was in the 80s under Margaret Thatcher and also lower than it was in the 50s when growth was good and living standards were rising quickly.
The level of the debt itself, relative to GDP, also is nothing unremarkable in historical terms.
https://en.wikipedia.org/wiki/United_Kingdom_national_debt
I agree with @Alex to the extent that it’s desirable to reduce Government debt, but I don’t think interest payments are “the main explanation for the apparent paradox that taxes are so high yet many public services are short of funds” That paradox has existed for at least 10-15 years even though for much of that time interest rates were close to zero. But the paradox didn’t exist in the 1950s and 60s when debt and interest rates were high – so there doesn’t seem to be any connection.
Getting a bit off-topic for this thread but my suspicion is that the paradox largely arises because we demand so much more of the Government and demand higher standards than in the past, but we forget that those higher standards cost money. A good example is in the current parallel LibDemVoice discussion about sewage: Raw sewage pumped into waterways etc. has been around since the industrial revolution, but 50+ years ago, as a society we basically didn’t care. Now we demand higher standards and effective treatment of all sewage – a good thing in itself, but it has to be paid for, hence a service that looks the same to consumers (providing water) becomes more expensive. That’s just one example, but you can see the same pattern across many public/Government services if you compare what’s considered acceptable today with what was considered acceptable 40-50 years ago.
@ Simon R
“I agree with @Alex to the extent that it’s desirable to reduce Government debt”
Ok but how? There are three ways you can to do this as a % of GDP.
1) You can increase GDP. Of course all politicians say this is the way to go. However saying is one thing doing is another.
2) You increase taxes on holders of debt. So for example if anyone owns any kind of Government security you can give them a tax bill. Or, give everyone a tax bill. This can be self defeating if this causes the economy to slow which in turn reduces Government revenue. The deficit remains the same or even increases.
3) You could encourage everyone to cash in their securities and spend them. Or encourage everyone to save less and borrow more. It is effectively the same thing in macro-economic terms. This can be achieved by lowering interest rates and seems to be the preferred option of the neoliberals. The snag is that levels of private debt increase and the extra spending doesn’t usually end up financing the more productive sectors of the economy. Instead it ends up in the housing market and creates the danger of a market bubble which can burst with serious consequences as we saw in the USA in 2008. It’s also potentially highly inflationary in the short term.
So there is really no good option. The best approach might be to recognise that we just have to muddle along without doing anything too drastic.
There is a fourth way. You can sell public assets. That’s why you should target increasing net government worth (assets minus debt) rather than government debt in isolation. It also neatly redefines government investment. Instead of a binary split between investment (which pays back in five years) and expenditure (which doesn’t) look at how much it increases the actuarial value of government assets.
@ Peter Davies
“You can sell public assets” ???
As you say yourself you should target net public worth. ie Assets -debt
So whatever you subtract from assets is also subtracted from the debt. Therefore the difference is unchanged.
That depends on whether the assets are earning anything. If the assets are not earning anything (for example, unused land), then selling them off is still financially worthwhile because it reduces the interest you are paying on the debt. The question really is, does whatever return the assets are giving you exceed the interest payments you’d save if you converted them to cash in order to pay off some of your debt.
Assets minus debt – the thing @Peter says is unchanged – is a good measure for assessing the value of a company and the risk of lending money to it because it gives a measure of what you could get back if the company was wound up and sold off. That’s not so relevant for a Government though because no Government is going to get wound up!
Peter Martin,
I didn’t say that the size of the national debt would fall. Investing say 1.2% of GDP should increase GDP by more than 1.2%. Therefore the ratio of national debt to GDP should decrease, especially if this continued for the whole five years of the 2019 government.
I don’t accept your premise. Money is not just created by the Bank of England or the government as you see it. The deficit is not equal to everyone’s savings. Government spending plus investment plus exports equals government revenue plus savings plus imports when the economy is in equilibrium.
No government destroys the money it collects in taxation. You quote MMT as if it is actually practiced in the UK and it isn’t. Corbyn and McDonnell and others suggested that instead of the Bank of England allowing banks to create money into the economy it should instead allow the government to do so (People’s Quantitative Easing).
Alex Sabine,
I am not convinced that inflation was a great problem in the 1960s. See https://www.macrotrends.net/global-metrics/countries/GBR/united-kingdom/inflation-rate-cpi There were three peaks 1962 up 3.20% from 1960, 1965 up 3.72% from 1963 and 1969 up 3.89% from 1967. So your statement is true, but is it significant? What were significant were 1971 up to 9.44%, 1974 16.04%, 1975 24.21% and 1980 17.97%. I am not convinced any of them were caused by the correct application of Keynesian economics.
Simon R
“I agree with @Alex to the extent that it’s desirable to reduce Government debt,”
Alex didn’t write that the government should reduce its debt. He stated that the government could reduce the ratio of national debt to GDP, as can be seen happening in the past from -https://en.wikipedia.org/wiki/United_Kingdom_national_debt#/media/File:UK_debt_as_GDP_percent.png
What is interesting is that in the1820s the national debt was twice the size of the economy. Until the 1860s it was above the size of the economy. It fell to twice the size of the economy in the 1950s.
I can’t see any benefit for anyone if the government reduced its debt. I would like to see the economy grow at a faster rate that the national debt. I can see that it is desirable that over time the national debt falls compared to the economy so that the national debt can be increased in relation to the economy when necessary without causing huge problems.
My latest theory: Any discussion on LibDemVoice, on no matter what topic, if continued long enough, will eventually morph into a discussion about MMT vs conventional economics and the national debt etc.
btw I believe the high level of debt/GDP in the 1820s was because of the Napoleonic wars and was seen at the time as a short term consequence, not an ideal. The graph on this page https://articles.obr.uk/300-years-of-uk-public-finance-data/index.html clearly shows how, up until very recently, high levels of debt vs GDP only occurred temporarily in the aftermath of wars and shows that the high peacetime borrowing of the last 10-15 years is historically unusual.
I would say the benefits of reducing the national debt are (1) Government spending isn’t wasted on paying interest, (2) it’s easier and likely to be cheaper for the Government to borrow further if an emergency arises, (3) more international/business confidence in the country’s finances, which helps economic stability.
@ SimonR ,
We could reword the well known cliche as “its the economics , stupid”. Stupidity, in recent years, was mainly in the form of needless austerity economics of the post 2008 GFC period. Problems caused include the election misfortunes of the Liberal Democratic Party. It resulted in Brexit too.
The (mis)concept of the National debt is used to scare voters by politicians with nefarious motives. We’ve all seen those debt clocks which add to the total in real time. They always increase. ‘How on earth are we ever going to pay it all back’ is the question they are designed to provoke. The last time I checked the world owed some $80 trillion (as expressed in US dollars). But who to? It’s not the Martians.
We owe it to ourselves. It’s our collective savings. So if the debt is bad thing so are our savings.
Left as debt they aren’t a problem. They could be if we all tried to spend them too quickly though. There would be insufficient real things for us to buy. These are the limiting factors, and not the numbers of dollars etc which determine what we all can afford to do.
We should factor in real interest costs. So although rates have risen they have still been lower than the rate of inflation. So it might not feel like it for borrowers, in the short term, they’ll be getting the better of the deal in the longer term. No-one gets rich buying up Govt bonds any longer.
@ Michael BG,
Of course, Govts can store up their own IOUs if they want to. It saves them the cost of printing new notes and minting new coins.
You can do the same yourself. Old fashioned cheques made out to cash perhaps. It won’t make you any better off though. They are only going to be a security risk so it’s safer to put them in the shredder and write out some more when you need them.
The point about banks creating money by lending is often misunderstood. Governments usually create money by spending. Spending is not the same as lending. It creates new net credits in the economy. Lending doesn’t.
Simon R,
The financial crisis of 2008 and Covid plus the failure of governments since to get economic growth back to the average between 1993 and 2007 of 2.98% is why the ratio of national debt to the economy has increased.
Peter Martin,
My point was not that governments couldn’t create the money and spent it. My point was that our government does not do this. The Bank of England allows bank to create money by lending it.
Extra government spending is better than tax cuts for growing the economy. However, if the money created by the banks was used for business investment (rather than buying shares or houses) this too would lead to economic growth.