What exactly DO we want to leave to our children?
Over the last few months several arguments have been put forward in support of tackling the national debt urgently. One of the most compelling is that it is irresponsible to saddle our children and theirs with crippling debt, so that we can ‘live it up’. It is an argument which resonates powerfully. After all, most of us have people that we love, who know not what a cassette tape is and to whom the name “Alexis Carrington” or the catchphrase “loads’a’money” mean nothing.
This argument appeals to the very best facet of human nature – the instinct to nurture; the aspiration to leave things better for the next generation – and is therefore almost irresistible.
Almost. But there is a little thread hanging from one corner. I have the urge to tug at it.
Let us suppose that I knew tomorrow I would be no more. The plane tickets to Geneva have been booked. The appointment at the Dignitas Clinic has been made. If I chose to leave my flat to my beloved nieces and nephew, encumbered as it is with a mortgage, would I worry? I would not. The repayments are manageable and the flat is worth more than its mortgage. Especially considering the invaluable security of having a roof over one’s head. To put it in terms even those concerned only with money will understand, I would have left them with positive equity.
This was precisely what our parents’ generation decided to do. And their parents’ before them. National debt, as a percentage of GDP, was much higher from the 20s to the 70s than it is now. But they made the positive choice of bequeathing it to us, as well as a world-class National Health Service, free Higher Education and a Welfare system which provided a safety net for the less fortunate. Had they looked at debt in isolation, they would never have achieved any of these things. Luckily, they did not. They left us with positive equity.
The proposition put forward by the Coalition government in support of their savage cuts, is the bequest of a clean slate. In the current economic climate, however, a clean slate means clean of assets and not so clear of debt.
On the one hand we have the self-interested privatisation of the NHS, the sale of local council assets, the dismantling of the welfare state. On the other hand is the transformation of public debt into private debt, by squeezing our living standards and the earlier enslavement of the next generation to the banks because of ludicrous tuition fees.
So, what is actually being proposed, is leaving our children with negative equity. The debt will still be there, but the assets will be gone. Important assets at that, the absence of which will translate into higher living costs – privately funded health, education and pension models.
Maybe this is genuinely what people want, having taken all the arguments into consideration – but let’s consider all the arguments.
Let us not be caught up in Cameron, Osborne and Clegg’s emotive language of “saddling future generations with debt”, without considering the assets and values that would also form part of that inheritance. And most importantly, whether it is worth it.