Saturday, 21 May 2011

Why we should take debt seriously

There are those who argue that Britain's debt problem is not serious and simply a cover for David Cameron to slash the public sector. Two interesting posts by economist Mark Harrison argue the contrary case: Debt

Quite apart from anything else, having a large debt means that a great deal of money is spent servicing it. Britain has the lowest costs of any major country in terms of servicing its debt, but even so it cost a mouth watering £44 billion last year. Think of the opportunity cost of that.

Britain has been living beyond its means in terms of personal and public consumption for some time. How that burden is shared out between public expenduiture cuts and reduction in personal income is a matter for political judgement. However, 'rebalancing' the economy certainly involves a squeeze on personal incomes so that there is an export led recovery.

Of course, there is a political cost to that. But even if confidence in the Coalition's economic competence is declining, as polls suggest it is, voters evidently many reservations about Ed Miliband.

It may provide an opportunity for parties of the populist right like UKIP who have an alternative narrative about globalisation and Europeanisation. However, such parties are often not well led and it is difficult for them to succeed under a first past the post system.

The one leader and party that is riding high in Britain at the moment is Alex Salmond and the SNP. The Scottish question could potentially become the equivalent of the Quebec question in Canada: never resolved, but always a key factor in national politics.

Quebec has, of course, achieved considerable autonomy and even has a ministry of foreign affairs. The future for Scotland might not be separation, but it could come close to what was mooted in Quebec at one time: sovereignty-association.

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