Training

The British national debt - lessons from history

Gareth Turner

i. Aim/vision:

To bring historical research regarding the British national debt to the attention of policy-makers in central government, in order to influence and inform British fiscal policy.

ii. Key messages:

• Despite the government’s alarmist rhetoric, Britain has often borne far higher levels of national debt than those of today, without suffering liquidity or insolvency crises;
• However, history would suggest that the national debt, (although far from abnormal), is a cause for concern. The scale of the current budget deficit is unprecedented for a period of peace, and prolonged increases in indebtedness have been shown to have debilitating consequences for the economy;
• The history of the British national debt, which dates back to the establishment of the Bank of England in 1694, offers contemporary policy-makers important lessons for today;
• The post Second World War experience of paying off the national debt, when the ratio of debt to GDP was reduced from 225 percent in 1945 to 67 percent in 1970, suggest that the best way to reduce indebtedness is through economic expansion. Cuts in public expenditure should not undermine growth.
• The most efficient way to make retrenchments in public spending is through non-parliamentary action. The Geddes Committee in 1922-23 was successful because it was composed of politically non-aligned businessmen who made decisions based upon logical, rather than political, considerations.

iii. Policy Context:

• Since the formation of the coalition in 2010, the government has advanced the argument that cuts in public expenditure are needed in order to reduce the budget deficit and prevent a loss of international confidence in Britain’s solvency. Despite the fragile economy, the government has presented a series of fiscally neutral budgets, with increases in public spending compensated for with comparable reductions.
• The government’s policy has been vehemently contested. Some argue that a reduction in the government’s budget deficit is necessary if Britain is to avoid a sovereign debt crisis, comparable to that currently inflicting countries like Greece and Cyprus. Others believe that the government’s deficit reduction programme is undermining the British economy. These people suggest that a Keynesian fiscal stimulus is needed instead of fiscal prudence, in order to boost economic growth.

iv. Objectives:

1. To organize at least three seminars between historians and civil servants working in HM Treasury, (one seminar on the current level of national debt in historical context, one on the importance of growth for reducing indebtedness and one on the role that non-parliamentary action can play in reducing public expenditure), between 1 May 2013 and the presentation of the next Budget in March 2014.
2. To obtain evidence of a positive reception from civil servants in the Treasury towards the information given by historians;
3. To organize at least three seminars, (on the same subjects as above), between historians and civil society practitioners at the Institute of Fiscal Studies (IFS) on the history of the national debt by 28 February 2014;
4. To obtain evidence of a positive reception from civil society practitioners at the IFS;
5. To publish at least one policy paper on the history of the national debt and the lessons that history offers policy-makers today by 28 February 2014
6. To obtain evidence of the positive impact of historians’ interventions in at least 4 relevant media publications by 28 February 2014.

v. Audience

• Civil servants working in the Treasury on British public expenditure policy and the 2014 Budget;
• Civil society practitioners working at the IFS, in order to influence policy-makers in the field of public expenditure policy;
• Relevant media, particularly the financial press, to reach public expenditure policy-makers
• Other think-tanks and academics researching the national debt and its possible consequences for the British economy.

vi. Activities

• Advise historians about the most effective ways to present their research to policy-makers. Adapt their research into clear and concise policy papers;
• Make use of History & Policy’s (H&P) contacts with civil servants at HM Treasury to organize seminars between historians and civil servants;
• Ascertain if any of the historians within the H&P network have an existing relationship with the IFS. If none do, contact Monica Costa Dias or Andrew Leicester (who organize seminar series at the IFS), and arrange seminars between historians and civil society practitioners;
• Publicise events and policy-papers through relevant traditional media. Target outlets with a particular focus on economics, particularly The Financial Times and The Economist;
• Also publicize events and policy-papers through social media and blogs.
• With the permission of those involved, publish historians’ presentations at HM Treasury and the IFS as an online resource on the H&P website, along with a news article relating to the discussions that took place at the seminars.

vii. Monitoring & evaluation

.

• After each seminar, seek feedback from civil servants at HM Treasury and civil society practitioners at the IFS to inform the structure of subsequent seminars;
• Evaluate seminars at HM Treasury and IFS with feedback forms, to be presented to be participants at the beginning of the seminars. Collate feedback in order to assess the success of the seminar series;
• Monitor media impact of historians’ interventions using to assess the media search prgramme ‘Nexis’ as well as ‘Google News’.