Britain's political scene is sporadic, but one constant stayed through it all: skyrocketing national debt poor judgment in allocating public spending. Since 1988, national debt has gotten out of control, and now sits beyond GDP.
Parliament's economic judgment have faltered post-Thatcherism, with successive prime ministers failing to replicate her economic stability. It is clear, therefore, that we should look to past successes to secure a stable future.
The radical transformation of the nation's economy worked. Thatcher's Conservatives sought to manage first, then grow— curving inflation. Tax cuts across all bands encouraged buying and selling that stimulated productivity. Britain's slump from the winter of discontent came to an end.
1988 saw the nation stabilised by restrained government spending in free markets; the public sector showed this. According to the Office for National Statistics, national debt sat at a mere 31% of GDP, then shrinking to 22.9% in 1990. Government spending also focused on the people: social security and welfare' - 30% , health - 13%, education 12%. A far cry from the burdens of today's economy.
According to the International Monetary Fund, the UK is 6th in the world for the largest central government debt by percentage of GDP (2022). When comparing nations with debt recorded in the same year, this rises to 3rd, accompanying Greece (203.3%), and Japan (216.2%) on the podium. This is nothing to celebrate. This parlous state of public finances could have been mitigated were borrowing done sparingly.
Money does not grow from trees, nor does it grow from bonds, yet it seems the former government understood neither. Excessive borrowing— over £140.6 billion by the central government (2024 ONS)— leads to comically large interest payments. The Office for National Statistics reports £20.5b was borrowed in April 2024, the highest reported since 2021, drowning the nation in £4 billion in interest.
True: More is invested into social services today than in 1988.
The Institute for Fiscal Studies (2022/23) reports an increase in social security for pensioners, working-age, and children (22.4% combined), health (18.3%), though a fall in education (9.1%, compared to 12% in 1988). Regardless, the reckless spending of the former Conservative government cancels out the sentiment:
- £25 billion for public funds spent on the abandoned HS2
- £202 million worth of Covid contracts lost to fraud
- £9.9 billion wasted on faulty Covid PPE
- £320 million spent and unrecovered from Rwanda Scheme
Were governments to not haphazardly spend borrowed funds on ambitious projects, perhaps national debt would not have risen above the 100%s.
Following Stamer's appointment on Friday, it's hard to tell whether putting "wealth creation [as] our number one priority" will dig Britain out of an ocean of debt. Though even if the GDP/debt ratio shrinks, it is a decade-long waiting game till we see it below 100 again.
References:
1988 GDP/debt ratio (31%)
Net debt from the public sector as % of GDP for April 2024: 97.9%