Massive reform is needed before we ask the unborn to pay off our debts

Philip Hammond is receiving representations from his Conservative colleagues calling for public-sector pay increases and other spending pledges. He is sensibly arguing that we need a “grown-up debate” about whether people are prepared to pay to increase public spending. Polls show the population in favour of higher taxes and spending provided they don’t have to pay.

Despite some success in lowering the budget deficit from £152 billion in 2009-10 to £47 billion in 2016-17, targets have repeatedly been missed and fiscal rules broken. It was the 15th consecutive year in which the Government spent more than it raised. This means we are racking up more debt. In 2011 the Office for Budget Responsibility forecast that by the end of 2016-17 public-sector net debt would be 76 per cent of GDP. The actual figure ended up being 86 per cent.

If you think that’s bad, the OBR’S latest forecasts suggest that debt will be 234 per cent of GDP by 2066-67. Future governments will not be able to get away with slicing a billion off departmental budgets here and there: massive reforms to the two big items – welfare and health care – are needed. What’s more, since 2010 we have paid £255 billion in debt interest. This year, payments will exceed the sums raised in fuel duty and stamp duty combined.

If the current picture is bleak, the alternatives are truly terrifying. In its election campaign, Labour promised to spend £250 billion on infrastructure by borrowing more money. When challenged, Jeremy Corbyn showed he didn’t understand that government bonds are a form of borrowing. No problems there then.

We should remember that the official national debt is a significant understatement of how bad the public finances are. Lots of liabilities are kept off the balance sheet; the real figure is several times the official £1.8 trillion. When you add in liabilities for publicsector pensions, the state pension, debts from PFI deals and more, the real national debt is over £8.5 trillion. It is hard to see how the Government can reduce the debt burden in the long run without running surpluses.

All of this means that, far from turning on the taps, we need to be prudent and see which quangos can easily be ditched and there is still time to drop HS2. The answer from the Left is always to spend more taxpayers’ money. When we were in recession, they argued for more spending. Now we have modest growth the answer is more spending. So it was encouraging to hear Philip Hammond sound a note of caution. As David Cameron reminded us this week, more debt and more borrowing is selfish – it’s asking generations not even yet born to pay for stuff that we want today.