General Election Rant!

The upcoming general election is going to be important for British politics. In broad terms I can sympathise with Russell Brand’s argument for not voting, the two men running for PM certainly don’t represent me personally and are genuinely devoid of charisma, but there are big, meaty choices to be made.

First and foremost though, is the huge difference of opinion between the two major parties about how to tackle Britain's national debt.

According to official figures the debt is £1479 billion, but depending on how you view this figure it can be seen as a massive underestimate of the amount of money we truly need to pay back. If we include the intervention in the financial sector net debt rockets up to £2198 billion (Public Sector Finances, February 2014). But, what’s most sobering of all, is what happens when future revenues and liabilities are analysed. Private Finance Initiatives (public infrastructure projects funded by private capital) and future pension obligations are huge “off balance-sheet” liabilities that will need to be paid off in the future. Combined with a projected growing and aging population economists can derive an “implicit government debt”. Nick Silver of the Institute of Economic Affairs estimated the current British liabilities, including state & public pensions, as well as other commitments by the government, to be near £5 trillion.

Why does this matter? Personally, I don’t buy into the much touted relationship between high debt and poor growth, but the pay back on interest is significant. Debt-financing has already become the fourth biggest component of government spending, and will cost £72 billion by 2017/18; more than the entire defence budget. (OBR 2014).

Worst of all though is the risk of what might happen if we found ourselves in another recession. I hope nothing of the sort happens, but there are potential bubbles all over the place, entire economies ready tocollapse and a financial market I still fear remains under- regulated. Then again, economists have predicted 100 out of the past 4 recessions, as the saying goes.

(High debt also has an adverse effect on our balance of trade but I feel like explaining that I’d bore you to death, if I haven’t already)

What do the parties plan to do about tackle this burden? The Conservatives claim they will achieve a surplus of £20 billion by 2020 while Labour is only trying to break even on the current budget; the difference between day to day spending and tax revenues. At current levels that means Labour could be borrowing a further £25 billion for investment.

So, given how bad the debt is, I’ll be voting Conservative then? Well no.

To start with I don’t think the Conservatives plans hold too much water. To be in surplus by 2020 they would need to find spending cuts tothe tune of £33 billion AFTER the tough round of cuts already proposed for2015-2016. In fact, if we take the plans lined out in the Autumn Statement at face value then they would need to be cutting £50 billion.  IFS director Paul Johnson described these cuts as “colossal” and considerably 17pxr than anything seen in this parliament.

But, much more importantly, I don’t think austerity is the solution at all. Absolutely the previous Labour government presided over a culture of over spending, poor efficiency gains and tremendous blunders, but let’s not kid ourselves. The recession caused the debt, not the other way round. If instead of focusing on the budget we focused on reaching the full potential of our economy then welfare pay-outs would fall and income tax would rise.

On one hand unemployment has already fallen to 1.91 million, which is still a lot of people out of work, but this figure says nothing about the people who are “under-employed”: those working worse jobs or fewer hours than they’d like. As someone entering the job market for the first time in a couple of months, I’m not exactly filled with confidence.

The Cost of Unemployment

Given this, cutting infrastructure spending, as the Tories plan to do, seems particularly unwise. A good investment is a good investment, and if it will create better jobs and wealth, then it should be a priority.

Furthermore I have my own self-interests to look out for. The burden of austerity disproportionately falls on the younger generation; because it is in their lifetimes that the overspending will be repaid and because many of the elderly people who voted for big spending will be retired with generous pensions while the young, who did not benefit as much from the spending, work off their debts. Also, any damage to economic performance will affect the young and poor more, because they have not been able to accumulate a stock of wealth and savings to fall back on, and because under-25s are 4 times more likely to be unemployed. In fact, many young individuals will be tens of thousands of pounds in debt because of raised university tuition fees. While welfare spending has been capped, many provisions that are popular amongst the voting demographics have been protected, such as the “triple-locked” pensions, winter fuel allowances and bus passes regardless of income.

This is not to say I’m going to become a card carrying Labour member anytime soon. I still think the Conservatives would do a much better job of routing out efficiency gains and implementing smart policies to save money. I also have much doubt about Ed Balls, especially as in one week he’s come under fire for being either complicit or ignorant about HSBCs tax avoidance and for boasting about bank deregulation in a 1997 documentary.

Regardless of if you agree with me or not, there’s one thing we should all be able to agree on. By not voting you give the political system no incentive to consider your needs. All that matters is you turnout and make your voice count. And if you strongly disagree with everybody, you might as well draw a massive hairy dick on your ballot paper.