Why is no-one talking about the looming debt crisis?

In both Britain and the US, the borrowing bubble is in danger of bursting

A decade ago, the central issue of British politics was the budget deficit. The coalition government’s guiding mission was balancing the books. At every turn, Cameron and Osborne reminded us that the nation had maxed out its credit card. Even Ed Miliband’s Labour Party agreed on the need to bring down the deficit over time. Fiscal discipline was the order of the day.

Ten years on, conversations about the deficit are notable only by their absence. That’s despite the fact our national debt has nearly doubled in the meantime. The amount the UK owes is now bigger than our entire economy. We are spending more than a hundred billion pounds a year on debt interest alone. Not paying down the debt, just servicing it. That’s almost twice the entire defence budget.

And it’s only going to get worse. The budget deficit is growing again: standing at £148.3bn in 2024/25. 30-year bond yields are now twice what they were a decade ago. The OBR projects national debt will reach 274 per cent of GDP within 50 years. That means, on current trajectories, 34 per cent of all government spending will go towards debt interest within my lifetime. 

Yet no-one seems to care. The left blames all of society’s ills on the coalition’s austerity programme. That’s despite the fact reducing the deficit simply meant reducing the rate at which our debt was increasing, not the debt itself. Meanwhile, many on the right - from Boris Johnson to Rory Stewart - seem to have accepted the narrative that austerity was simply a vindictive policy choice, as opposed to what it was: an economic imperative.

So perhaps it’s unsurprising that profligacy is no longer confined to Labour and the Democrats. Nigel Farage, in his Boisdale-does-Keynes era, is promising to scrap the two-child benefit limit and restore the winter fuel payment to all pensioners. Donald Trump is adding trillions to the US national debt via his truly absurd “one, big beautiful bill”. And Kemi Badenoch barely says a peep about the government’s fiscal irresponsibility. But then again, she barely says a peep about anything.

We now have the highest tax burden since the Second World War. Government spending accounts for 45 per cent of the entire UK economy. Yet does anyone feel they’re getting more bang for their buck? Is it easier to get a GP appointment these days? Are there more police on our streets? Of course not. At the heart of voters’ discontent is the sense they’re getting less for more. The reason is because an ever-growing chunk of their ever-growing tax burden is being wasted on debt interest. 

I can understand politicians’ reluctance to talk about this. Firstly, any conversation involving the word ‘fiscal’ is enough to make most voters fall into a coma. Most wouldn’t even be able to explain the difference between the debt and the deficit. Secondly, with living standards so squeezed, the notion that further spending cuts are required, or that taxes may need to rise further, is anathema to much of the electorate. 

Yet the British people have a greater propensity to understand hard truths than many give them credit for. Cameron and Osborne’s austerity programme was broadly accepted by voters because the logic of it was explained over and over. They were re-elected in 2015 not just despite it, but because of it. The argument for balancing the budget had been won, and it can be again. 

It is a quarter of a century since the UK last ran a surplus. If we were to start running them again, we could - over time - create more room for tax cuts and public spending. In other words, get more for less instead of less for more. It’s a hard sell, but the status quo simply cannot continue. This should be the guiding mission of the centre-right in the 2020s.