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Jill Kirby

Jill Kirby: The real divide in the West today is not between the young and the old, but between those paying for the state and those paid by the state.

In the first of his Reith Lectures yesterday, the economic historian Niall Ferguson linked the relative economic decline of the West in recent years to its addiction to debt, and called for greater honesty and clarity in public accounting. Repeating his earlier warnings that the West will lose its global ascendancy if it fails to curb its debt addiction, Ferguson also seemed to be doing a little borrowing of his own – from the argument expounded by David Willetts in The Pinch, his 2010 book on intergenerational unfairness.

Ferguson shares Willetts' view that the baby-boomers growing old today are dumping debt on the next generation, rather than facing up to the need to cut spending now. Giving an extra twist to the argument, Ferguson asserts that today's young people have every reason to vote against big public spending, since it is they who will pick up the tab, yet they still seem most inclined to cast their vote for more welfare entitlements.

As ever, Ferguson is an engaging speaker and makes a plausible case. Certainly, most of the governments of the West are hooked on debt and Ferguson is correct to point out that a great deal of it is off balance sheet; PFI is a good UK example. Political failure to face up to difficult decisions also means that debt continues to grow. In the UK, for example, the Coalition has made a lot of noise (and taken a good deal of flak) over its attempts to reform public sector pensions, yet the reforms are timid and have made very little impact on the long term cost of those pensions.

So there was much to agree with in Ferguson's argument. Yet as he concluded his first lecture, I felt that this was not Ferguson at his best, or most original. Asserting that debt creates intergenerational injustice is a fashionable nostrum, but it is very far from providing a complete picture.

Take pension provision: the baby-boomers who retired from jobs in big corporations just in time to pick up final salary pensions, along with many of those now retiring in the public sector, certainly enjoy a higher standard of living than their children are likely to be able to save for. But for the rest, the majority of UK sixty year olds, pension savings have been knocked back hard by inflation and prospective annuities halved by repeated doses of QE. These baby-boomers are feeling sore that their savings have been eroded whilst producing negligible rates of interest. They are paying for Britain's credit binge, right now.

As they observe their GPs retiring on £48,000 a year, or learn of civil servants' gold-plated pensions and lump sum awards, their concern is not intergenerational unfairness but inter-sectoral injustice, between those paid by the state and those in private employment. Likewise the young working families whose heavily taxed pay has not kept pace with inflation, yet who see a 5% increase in welfare payments to benefit-dependent households. The real divide in the West today is not between the young and the old, but between those paying for the state and those paid by the state.

And this brings me to my second reason for being disappointed by yesterday's lecture. I was waiting for Professor Ferguson to point out that the reason for the massive growth in public debt in the West, certainly in Britain and the U.S, is the insatiable appetite of politicians to grow the role of the state. Perhaps he felt that this didn't need saying, that it was inherent in his argument. Or maybe the lectures later in the series will seize the opportunity to spell out this very necessary conclusion.

More honest public accounting would certainly help to demonstrate the price tag attached to big government. But it will not of itself do the trick. Politicians will always find new ways to clothe their financial profligacy in the language of responsibility. They will talk of “investment” rather than spending, “credit easing” rather than state-backed debt. If all else fails they will simply restart an economic cycle. Few voters will probe the numbers in sufficient detail to spot what the new balance sheets are really saying.

Every day, despite the hideous financial situation in Europe and with no apparent thought for balance sheets, British politicians (including Conservatives) come up with new ways to spend money and new areas of life for the state to get involved in. Regular readers of this column will know that I write about these initiatives on an almost weekly basis. Yesterday's example was the government launch of a new consultation on childcare, suggesting that schools could be responsible for children until 8 o'clock at night, and lamenting the cost to British parents of buying childcare places.

Would it not be better to suggest that the state withdraws from childcare altogether, stopping the subsidies and leaving parents free to make their own private arrangements for the care of their children? Why did we ever embark on this merry-go-round of payments, inspections, “nappy curriculum” and adult:child ratios? Let parents be the best judge of how their children are cared for, the only reason for state intervention being evidence of neglect or abuse.

Such thinking might usefully be applied to so many areas of state involvement, from the unstoppable expansion of nationalised healthcare to the multiple and self-sustaining layers of government bureaucracy; from state-sponsored broadband to subsidy of the Olympics.
Instead of trying to induce guilt and anxiety in the baby-boomers, public intellectuals of the Right should be challenging the widespread and lazy assumption that the state has the answer to every problem and the money to solve it.

Where better to start than in a lecture on Radio 4? For the BBC has long been one of the most enthusiastic proponents of the expansion of state activity, and one of the loudest to complain at the possible withdrawal of any form of state subsidy.

By the time we reach the end of Niall Ferguson's four Reith lectures, I hope that this fine historian and standard bearer of Conservative thinking will have given us a new definition of the role of state in Western democracy – a role which is not only affordable, but which strengthens, rather than curtails, our freedoms. And I hope that Conservative politicians will have heard that message and gain the courage to deploy it for themselves.


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