In his autumn budget statement, Chancellor Jeremy Hunt said that the Conservatives don’t leave debts for the next generation. As such, he vowed to halve government borrowing over the next five years.
This promise is key to the government’s justification for austerity, spending cuts and other unpopular policies. Hunt is appealing to the commonly held idea that high levels of national debt unfairly burden the next generation – we betray our children and grandchildren by taking on too much debt, leaving them worse off and saddled with the costs after we are gone.
But this view of public debt is incomplete. In a recent article, I outline when long-term debt wrongs our successors and when it does not.
Unlike private debts, where debts are in the deceased’s name only, public debt can be passed on to future generations. But the fact that some costs of national debt can be transferred does not imply that these generations are worse off. Whether the loan has been spent wisely or foolishly is significant.
If borrowed funds are spent on a short-term project (for example, investing in an enormous fireworks display) and some of the costs are transferred to the future, the future generation will probably be worse off as a result of the loan. However, if the funds are spent on a project whose benefits extend to future generations (for example, the war to end all wars), then even if succeeding generations incur some of the debt, they may be much better off overall.
Investment in public projects can improve the position of future generations. National debt can be used to finance investments in education, the labour market, and tackling the harmful effects of climate change that will benefit the young. Given the time pressures, this last option will not be available to future generations to handle themselves.
The view of debt as burdening the future loses sight of the fact that governments borrow money to invest in productive things. It is important that we don’t just focus on where the costs fall over time, but also where the benefits will fall. If borrowing for our children and grandchildren will improve their overall wellbeing and prevent future harm, it would be negligent not to help when we have the chance.
The real burden
The government’s position is that we need to reduce national debt through tax increases and spending cuts so we don’t impose costs on future generations. But it is awkward for the government to invoke “protecting the young” to justify austerity. When governments cut spending on essential things like education, social security and public services, it is younger generations that suffer the most.
In 2019, the UN blamed the UK’s “austerity experiment” for forcing millions of people into poverty, causing record levels of hunger, homelessness and decreased life expectancy for some. This was before the pandemic. And things have only deteriorated, particularly for young people.
The UK is one of the richest countries in the world, yet it has high levels of childhood poverty. Children are already burdened in education due to COVID disruptions. According to teachers, hunger is now one of the biggest challenges in the classroom. The use of food banks has risen by 81% in the last five years. Trussell Trust has distributed 2.1 million emergency food parcels this year, with 832,000 going to children. To make matters worse, more than 400,000 children in the UK do not have a bed. Primary school teachers are now raising money to provide bed bundles because their pupils are suffering from sleep deprivation. Although the government is pledging to increase school spending by £2.3 billion per year, the worry is that with rising energy bills and inflation it is not enough money for schools to make ends meet and feed children in their care.
Austerity and government spending cuts risk pushing the economy into deeper recession and increasing unemployment. Young working adults are already more vulnerable to unemployment than their middle-aged peers, and the gap generally worsens after a financial crisis or during a recession. Young people in the UK were hit disproportionately hard by the last round of austerity policies – youth unemployment was four times higher than for older age groups.
Early experiences of unemployment increase the risks of further unemployment over a person’s lifetime. More young adults are being forced to accept jobs that are low paid and demeaning. Young people become scarred by this early experience and they become stuck in a cycle of precarious contracts.
The damage to young people’s health, education and employment opportunities will extend long into the future. If increasing public debt is wrong because it unfairly burdens the next generation, it is difficult to justify austerity. We will be creating or preserving the very conditions we seek to diminish.
Nicola Mulkeen ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.