Cooking the Books II: The National Debt: whose debt?

The National Debt: whose debt?

‘The UK’s national debt hit a record £2.024 trillion at the end of August, £249.5 billion more than the same time last year’, reported the Evening Standard (25 September). Presumably seeking to be helpful but actually confusing the picture, the report went on:

‘To put the figures in some perspective, the debt level works out at roughly £30,000 per person living in the UK’.

So we are all on average £30,000 in debt, are we? No, it’s the government’s debt not ours. What is popularly called the ‘national debt’ is the outstanding debt, accumulated over the years, of the capitalist state and so is no concern of ours. To be fair to the statisticians at the Office for National Statistics (ONS) who compile the figures, their official name for it is the ‘General Government Gross Debt’. The total debt owed by persons is called ‘Household Debt’. At the end of March 2018 this totalled £1.28 trillion, most of which was mortgages. The two statistics are quite different.

Note that since 1974 a ‘trillion’ means only a thousand billion (not the billion billion it used to be). But it makes a more sensational headline to say that the government’s debt is £2.024 (with a full stop) trillion rather than £2,024 billion (with a comma).

Governments (unless they are directly involved in capitalist production themselves) generate no income of their own. The money they spend comes from two main sources, mostly taxes. If a government wants to spend more than what this brings in it has to resort to borrowing. This is normally done by selling short-term (Treasury) bills or longer-term bonds (gilts). The interest on these has to be paid from tax revenue.

Another statistic we are urged to get worked up about (but needn’t) is the ‘General Government Deficit’. This is the difference between what the government spends and what it raises through taxes and which has to be made up by borrowing. At the end of June it was £128.8 billion. If, on the other hand, a government’s income from taxes is greater than what it borrows, then there is a surplus which can be used to pay off a part of its debt.

Marx had something to say on the origin and consequences of the ‘National Debt’:

‘The state’s creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But furthermore, and quite apart from the class of idle rentiers thus created, the improvised wealth of the financiers who play the role of middlemen between the government and the nation, and the tax-farmers, merchants and private manufacturers, for whom a good part of every national loan renders the service of a capital fallen from heaven, apart from all these people, the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to speculation, in a word to stock-exchange gambling and the modern bankocracy.’ (Capital, Penguin edition, Volume I, Chapter 31).

This is a fair description which still applies today but, unfortunately, is a source of many currency crank theories. Marx was aware of this and warned:

‘The great part that the public debt and the fiscal system corresponding with it have played in the capitalization of wealth and the expropriation of the masses, has led many writers, like Cobbett, Doubleday and others, to seek here, incorrectly, the fundamental cause of the misery of the people in modern times.’

The fundamental cause of this misery is not the financial system but the class ownership of the means of life and production for profit. What is required to remove it is not monetary reform but common ownership and production directly to satisfy people’s need.

Socialist Standard November 2020