You might not have guessed that George Osborne is a commissioner for the reduction of the National Debt. This year he plans to increase it by borrowing £1,800 million every week. This is not what William Pitt the Younger had in mind when he established the Commission by statute, nominating such worthies as the Chancellor, the Master of the Rolls, and the Speaker of the House of Commons. They last met 28 years ago, and even that was over dinner—but the debt, which in Pitt’s day had reached £240 million, is now nearing £1,500 billion and they must get their act together.
They need be no more than polite about the promises in Mr Osborne’s autumn statement. He is budgeting to raise money by bearing down on tax avoidance. Chancellors always like to say that, for it sounds virtuous and painless, but it seldom yields much money. They claim to stop loopholes and they introduce incentives which, soon enough, are widened into loopholes. They look forward to the medium term, when everything will come back into balance—but the medium term, as this Chancellor knows, has a habit of receding.
A Chancellor who pays off his debts is more what Pitt had in mind—and now, after almost a century, the patriots who subscribed for War Loan will posthumously get their money back. The catch is, in that century, the money has lost almost all its value. Inflation, as always, has been the borrower’s friend, and is still with us. In the last five years, the purchasing power of our money has fallen by one-fifth. Now Mr Osborne is planning to save £18 billion by borrowing more cheaply—but if the lenders spot the catch, money will no longer be so easy for a Chancellor to borrow, or so cheap.
So the commissioners must prompt him to treat the scene with War Loan as a dress rehearsal, and to look again at his principal creditor—which is, improbably enough, the Bank of England. “Quantitative easing” at a time of crisis saw the Bank putting more money into circulation. It spent no less than £375 billion on buying government stock, which is still on the books. Yet the Bank as creditor is in all but name a wholly-owned subsidiary of the government as borrower.
Unlike the hapless debtors of the eurozone, we can still borrow and print our own currency. A stroke of the book-keeper’s pen would cross the £375 billion off both sides of the ledger and reduce the National Debt by a quarter. Having achieved that, the commissioners could buy themselves another dinner.