'UK's National Debt Is Like Early-Stage CANCER’ — £3TRILLION Debt Could KILL Britain

[00:00:00] Speaker 1: Let us speak to the wonderful Mark Littlewood from Popular Conservatism. Mark, always great to have you on the programme. What isn't so great is the fact that we've got 3 trillion pounds in national debt. And basically, it could all blow up at any second. Hey, tell us more. [00:00:14] Speaker 2: Yeah. Even worse than that, Alex. To be honest, you're right. The national debt, the cash debt, has passed 3 trillion pounds. In very rough and ready terms, that's about 100% of all GDP over a given year. So if people want to think of it in their own personal terms, think of your annual earnings and imagine you were that amount in debt. But it gets worse because the debt is growing. There is no sign that we're going to bring this down or even cap it. No government of any stripe has balanced the books over any year since 2001. So we've had quarter of a century of adding to this debt. And what makes it worse still is that we have a whole host of liabilities. For example, public sector pensions that will need to be paid out in future. The state pension, indeed, given the change in our demographics and an aging population. And guess what? The government hasn't put any money whatsoever aside for this. So we have colossal liabilities running into trillions facing us in the years and decades ahead. And to cap it all off, I think it's fair to say that virtually no mainstream politician is willing to face up to this problem. This is the equivalent of the UK having the early stages of cancer treatable if you actually get on with it. But if you pretend you haven't got a problem, that cancer spreads, gets worse, gets worse, and eventually kills you. So it's a very, very bleak and dangerous and wholly unsustainable situation, Alex. [00:01:51] Speaker 1: My understanding is that IMF have already told us we're too big to bail out. You said, you know, the area you've got to go after is welfare. That is where your greatest liability is, that's indebting you the most. There are other countries, of course, that run debt-to-GDP ratios that are worse than ours. I think of Japan. America is a basket-case economy in many respects. America's got the same issue. Then you've got the Eurozone countries. I mean, is this something that makes us uniquely critical, or is it the case that you can look across the G7 and go, well, it's bad for us, but isn't it bad for everyone? Yeah. [00:02:28] Speaker 2: Yeah. Look, I don't want to suggest that if a country is in debt at all, it's a disaster. That's not the case. And there are reasons why the government might want to borrow money, go into debt, especially if it's spending on infrastructure. I mean, the classic example is, let's imagine you're going to build a bridge. The cost of building that bridge is all over the next 12 months. But the use of that bridge might be over the next 100 years. It is reasonable, therefore, to borrow and pay all that back over 100 years, a bit like an individual taking out a mortgage. So it's not per se a disaster to borrow money if you're spending it wisely on investment. The catastrophe of the UK situation is that this is accelerating away from us. So let's break down that $3 trillion that we are in debt and let's look at where and when we accumulated it, Alex. So the first trillion of debt was related between the year 1694 and the year 2010. It took us 316 years to accumulate that debt. And just, you know, cast your mind back to the sort of things that happened over those 316 years. World Wars I and II, the Napoleonic Wars, the Crimean War, all sorts of stuff. That was our first trillion, 316 years. We clocked up the next trillion to get to a total of 2 trillion between 2010 and 2020. It took us a decade to clock up the next trillion, often referred to as the period of austerity. I mean, god almighty of largesse look like if you're clocking up debt at that level. And the third trillion, we've clocked up in the last six years. So we have accumulated more debt in the last 16 years than we accumulated in the previous 316 years. So that means it's running away with us. If we had a 3 trillion debt that we were just about servicing, ideally was coming down, but staying flat and stable, that's manageable. It's not very helpful because servicing that debt is costing us more than we spend on the entire education budget. But you can just about live with it. The problem is if the situation is getting worse, if it's running away from you. And there is no doubt that is the case. So god only knows when we will clock up the next trillion pretty fast, I would say. And there doesn't seem to be any political will to arrest this. So we are on a runaway debt train and nobody is reaching for the brakes. [00:04:58] Speaker 1: What would be, in your mind, the most important move to make in order to start turning things around? You say that no political parties are willing to address this. If someone was, if someone was being all ears listening to the show going, do you know what, Mark? I heard what you said about all the time periods and the accumulation of debt. And you're right. We've got to get on top of this. What should we do? [00:05:18] Speaker 2: Yeah, very good question. You touched on the welfare bill, Alex. I think we probably need to redesign that from first principles, right, rather than sort of thinking, oh, could we save a little bit here or a little bit there? We probably need to reset the entire system, start with a blank sheet of paper and rebuild whatever welfare system we want from scratch, rather than tinkering with the present one. The welfare bill is, what, about 330 billion a year, easily the biggest part of government expenditure. If you were to take welfare, health and education together, that is in very roundabout terms, about two thirds of the government budget. So you've probably got to find some savings in that slice of the pie. Sure, you can look at the other third, perhaps we can abolish the Arts Council, reduce or abolish international aid. There are definitely savings to be made in the other third. But if you're looking for big, big, big numbers, it's a bit difficult to look far beyond health, welfare and education. If they are protected or ring-fenced, you're going to really struggle to find the savings we need elsewhere. My second approach would be, let's make this a long-term thing. So let's, for example, say that welfare payments are just not going to go up with inflation or wages anymore. Even if we retained the current system and just said, but I'm afraid they're just going to go up 0% a year. Year on year, you allow inflation to do its work and actually in 10, 15, 20 years time, you've made colossal savings because you haven't been dialling up welfare payments. You've just flattened them. You've just kept them as they are and inflation erodes them. And then we've got a big issue around public sector pay, which has been going up faster than private sector pay, despite the fact that there has basically been no productivity gains in the public sector for about 15 or 20 years. So failure is being rewarded. I think we've got to say to those who work in the public sector, you will not be getting pay rises until productivity improves. If NHS productivity improves, we'll have a look at giving NHS staff productivity. But if it flatlines, no pay rises. So you can put in place those sort of buffers, but we've tended to do the opposite. Big pay rises for the inefficient public sector. Big dial up in the welfare bill. I think if you start to bring in those things, you don't balance the books this year. But you can see a way in which they would be balanced in 5, 10, 15 years time. And that would reassure the market. So a long term view, but it needs to be a brutal view as well. We don't need to save a few hundred million here and a few hundred million there. Our government needs to save tens of billions a year. [00:07:52] Speaker 1: And what about pensions? Because, you know, every time that comes up on this show, a lot of people get very upset at the idea that if we start messing about with pensions, that means that Mrs Miggins, who's just about getting by, is going to sort of, you know, have her life foreshortened by a decade. Whereas, look, at some point I'm going to be collecting a pension, probably not for another 30 odd years, but my view is this: if in the next 30 years, for whatever reason, I've been very lucky and, you know, made a fortune and have a couple of houses and loads of money in the bank account, I would say, well, OK, I won't withdraw my state pension because I think of it as an insurance policy. But every time you bring this up about, you know, should the state pension just be given to everyone or should it be means tested? Everyone gets really upset. Nobody ever wants to touch it. It's all about the triple lock. And yet you mentioned earlier how pensions are a huge, huge drag weight on our economy. [00:08:45] Speaker 2: Yeah, that's right, Alex. I mean, I'm not in favour of saying to you if you have saved frugally and invested well over the next 20 or 30 years of your life, you should be denied a state pension. We force people to pay into the state pension scheme. Those who have done well would have paid in more to the scheme than those who haven't done so well over their careers. So you have all sorts of perverse incentives. If you're thinking, hmm, if I live the next 20 or 30 years of my life frugally and put money away, I won't get a state pension. Whereas if I splurge it all now, I will get a state pension. And the state pension is what? You know, £12,000 a year. So if we're only giving that to people who basically don't save or can't save, we have perverse incentive effects. The way that you means test these things, which we do anyway, is they're subject to income tax. So if you are living entirely off the state pension, you basically pay no income tax on it. Whereas if you've built up your own private pension or are working into your old age, I don't know, perhaps bringing in 50, 60, 70, 80, maybe more than that, £100,000 a year, then when you claim your state pension, you will be paying 40p or 45p tax on it. So let's let the tax system do the means testing. We already have a very, very progressive tax system without making it even more progressive by denying people who have played by the rules that they are suddenly going to be excluded from the goodies. I don't think that's the way to do it. But on the triple lock, at some point, this has got to go. I mean, mathematically, if you keep the triple lock forever, at some point, the state pension consumes 100% of national income in many hundreds of years time. So we've got to get off this quite quickly. I mean, my sort of solution, why wouldn't this be fair? We say that the state pension will go up by inflation, or maybe just a tick above. So perhaps inflation plus 0.1%. Therefore, your hypothetical Mrs. Miggins knows that her state pension will stretch further just by a smidgen each and every year. That seems to me a fair settlement. Putting it up because wages have suddenly spiked in one year, way, way more than inflation. I mean, why should we put up the pension? Because the workers are doing well. So I would have thought inflation plus a smidgen would be a fair enough lock, rather than picking the biggest number of three. Why should it go up 2.5% if inflation is 0.2%? It doesn't seem to me reasonable at all. But none of this appears to be on the table. There are all sorts of untouchables. And if there are all sorts of untouchable things that we can't possibly contemplate that we're going to conduct surgery on and reductions on, this will get worse until you end up in a Greece sort of scenario, in which the markets make it near impossible to borrow money and the government can't meet public sector payroll. That's not imminent, but that is unambiguously the destination that we are heading towards if we don't dab the brakes and eventually U-turn the car. [00:11:44] Speaker 1: And finally, and finally, Andy Burnham, of course, on his holly bulb, doesn't seem to be reading the runes when it comes to the dire economic straits we may be in, because he wants to do things like nationalise water. Now, we can all see the failure of the big water companies, that they have not kept the targets. They're handing out massive bonuses to their chief execs while pumping the rivers full of faeces. You know, I live in the Thames water area and there's this massive water league just over the road from me. It's just, oh, it just pumps out like that, damn it, all the time. And so I have some sympathy with the idea that actually when it came to the privatisation of water in particular, it hasn't necessarily been a resounding success story. And yet, renationalising it would cost us £140 billion. And it seems Andy Burnham's wanting to, you know, devolve everything. Well, that's just more, that's just the state paying more. It's more state paid jobs rather than jobs that actually give money to the state through taxation. Yeah. He wants to nationalise everything, state paid. You know, he seems to want to get out the giant charity checkbook when, frankly, it doesn't exist. [00:12:49] Speaker 2: Yeah. No, that's exactly right. Look, Andy Burnham is falling here for what the great economist Friedrich von Hayek called the fatal conceit. That you look at some area of the economy where private business is failing or not living up to expectations. Take Thames water as an example. And you immediately leap to the conclusion that if only the government was running this, it would be a million times better. Well, I'm highly sceptical about that. The state sector would suddenly find loads of workers who would mend every leak efficiently overnight and make sure that there was no sewage going into the river systems and all of the rest of it. Just because Thames water has done a bad job is no reason to believe that the state sector would do a good job. So I would much prefer, again, which is something we don't appear to be willing to touch, is you've got to be very clear what the penalties are for leakage, for sewage leaks, all of that sort of stuff. And the people who need to pay the penalty are the shareholders. So the people who own shares in Thames water should be losing their shirt over this. Thames water should be allowed to go bust. If you bought shares in it, you've bought shares in a failed company, they will fall to zero and we'll sell it on for a pound. And we'll look at the regulatory framework. Do we have the right incentives and disincentives in the private sector? Are the fines sufficiently high for things going wrong? Are the incentives sufficiently good for fixing the leaks, for, say, building new reservoirs for sake of argument? So we need to look at all of that. But I have no reason to believe that if you suddenly handed this whole industry over to the Ministry of Water and you told a whole bunch of bureaucrats to run it, that it would be any better and an awful lot of historical reasons to believe that it would be considerably worse. [00:14:31] Speaker 1: All I can just say is Mark Littlewood for Chancellor. There you go. We love him. That's why we have him on. He would solve all of our country's crises. He's like our very own art laugher. I said last week. Mark, thank you ever so much, darling. That's how much you're appreciated. Yeah. [00:14:55] Speaker ?: Thank you.