Cutting national debt draws a line under crisis

H ARD as it is to credit, there is an idea gaining currency that taxpayers will see no benefit if cash from the sale of AIB shares is used to pay off a slice of the national debt.

According to this line of thinking, using a win on the scratch cards to buy a new car makes sense, but using it to pay off the mortgage doesn’t.

That a senior politician like Labour leader Brendan Howlin is coming out with this stuff suggests the expensive lessons of the crash were wasted on many of us.

Paying off debt now, while we can, instead of dumping it on the next generation, absolutely makes sense – especially when the money is coming back out of a rescued bank. It cannot be said often enough; the biggest legacy of the financial crash was a five-fold increase in the size of the national debt.

The fact that borrowing is cheap right now – thanks to the ECB’s soon-to-end loose money policies – is masking the scale of the issue.

Even so, we’ll spend more on interest this year than we do on education, despite record low borrowing costs.

Government debts of €185bn at the start of this year were in significant measure run-up because of the €64bn costs of the bank bailout. It looks like we’ll claw back around €30bn of that bill from rescued banks over time, but half the total cost of bank bailouts is gone, a dead loss.

Rightly or wrongly we bailed out the banks with borrowed money. If we really want to draw a line under the crisis we can do it by getting shot of crisis loans that leave us desperately vulnerable if a new crisis strikes, or borrowing costs normalise.