Daily Mail heaps bank debt on nation’s shoulders

The media’s attempt to batter the public into a state of economic illiteracy has been ramped up by the Daily Mail’s attempt to conflate bank bail-outs with the government deficit.

The media’s attempt to batter the public into a state of economic illiteracy and turn the mantra ‘strength through cuts’ into a national obsession was ramped up on Friday when the Daily Mail attempted to conflate bank bail-outs with the government deficit in order to strengthen its case for public spending cuts.

According to the Mail, UK national debt stands not at 58 per cent but at a full 240 per cent. The newspaper takes its cues from a recent Centre for Policy Studies report (pdf) in arguing that the true level of UK national debt is four times original estimates when taking into account the debts owed by those banks bailed out by UK taxpayers.

The figure of 240 per cent also includes government pension liabilities even though these are future costs, not costs that are being paid now. The ‘240’ figure prompted Tory MP, Brooks Newmark, one of the report’s authors, to state:

“It is clear that the extent of UK indebtedness is such that the coalition must be relentless in its efforts to cut the deficit as quickly as possible.”

We are being told that our part-ownership of profit-making banks reinforces the need to make hundreds of thousands of people redundant so as to address the deficit. I am at a loss, which is more than can be said for RBS which last year made an operating profit of £3.5 billion.

The coalition and its supporters in the media will seemingly stop at nothing, stoop to any level and use any argument, however tenuous, in order to persuade the public that ripping up public services and laying off public servants is necessary.

The bank bail-outs contribute to national debt, not the deficit. Cutting investment in Education Maintenance Allowance and other programmes may bring the deficit down but it will also create the sort of low growth which makes paying off the national debt a thankless, if not impossible, task. The national debt will only be tackled by fostering a sustained period of strong economic growth through investment in skills, education, transport and infrastructure, research, innovation and enterprise.

Addressing a private sector-induced deficit by putting in place the sorts of public sector cuts which damage the ability of the private sector to grow precisely at a time when the private sector is weak and bank lending is low may help boost short-term corporate profits but it won’t help cut national debt.

Labour must do more to counter the scaremongering that we are seeing in public debate about the size of UK national debt and challenge the media-established economic orthodoxy that the budget deficit is the product of public sector over-spending and can only be addressed through cuts. A low-growth economy is not in anyone’s interest.

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