Heaven knows, I’m not a deficit hawk – though I have Victorian Liberal’s horror of waste, especially wasteful public expenditure that is destructive: encouragement for buying cars, subsidised air travel or supermarkets, accountants employed by NHS trusts to code each treatment or to challenge each coding for each PCT.
But I have begun to get depressed by the rhetoric of the cuts debate. Has any modern economy actually managed to balanced their budget? Do we actually need to be in deficit just to operate these days? Isn’t it time we had a proper discussion about how, in practice, we can run a civilised nation when we can apparently no longer afford it.
Of course, there are still conversations to be had about why we allow our corporations to avoid paying their share – it may be that up to a third of the world’s money is now hidden offshore. But what if modern IT makes it impossible to collect now? What if we fail?
I have struggled for years about what I thought about future policy on money creation. There are radical voices – which rarely if ever reach the mainstream – which suggest that banks should now be prevented from creating money, as they currently do, because of the corrosive effect of the interest which they demand back on 97 per cent of the money in circulation.
I don’t believe this is practical or desirable. But the National Debt is a different matter. Why should a modern nation state have to pay £80,000 a minute, as the UK currently does, on interest – when it can create that money itself free of interest?
This is the stuff of heresy of course, but what is the argument against creating it rather than borrowing it? It is that governments cannot stop themselves from borrowing too much, and that is bound to create inflation. It will not create inflation in itself, any more than allowing commercial banks to create the money will do so. It is the failure of government control that we need to beware of.
So is it really beyond our skills to devise a branch of the independent monetary committee of the Bank of England that can decide each month – as they have been doing with quantitative easing – how much they can safely create?
At least this should be part of modern debate. Because it is quite possible that civilised government, that heals and educates, may become impossible without it.