Richard Murphy: Don't fall for Tory false narratives about borrowing

IF you ask an average person on an average street which political party has borrowed more since 1945 I have no doubt that they would say Labour did. If you then asked who had repaid more of the national debt I also think it likely that they would say it was the Conservatives that did. But they would be wrong.

New research that I have done shows that since 1945, the Conservatives have borrowed much more on average for each year that they have been in government than Labour - whether the figure is stated in actual sums borrowed or is adjusted for inflation. What is more, the Tories have only repaid debt in four of their 47 years in office and Labour did so in seven of their 28. Labour also repaid more each year, on average. But neither repaid much. The Tories have borrowed £1491 billion and repaid just £7bn in total.

I think that this matters. Firstly, it shows how good the Tories are at telling false narratives about themselves. People think they are small spenders and careful borrowers. That is not true. The claim is just a myth, like much of what they say.

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Second, Labour’s failure to even point this out shows how poor they are at communication. No wonder they are in trouble.

Third, and much more importantly, the research reveals an important truth. That is that all political parties borrow when in power. They need to do so. For those who are not aware of it, this is the only mechanism apart from quantitative easing that they have available to them to effectively inject the new money that a growing economy needs to function into the hands of those who need it to keep markets both stable and operational. Government deficits play a fundamental role in delivering prosperity in that case.

Fourth, and most worryingly for Scotland, the SNP leadership still does not seem to understand this. Despite the fact that all the assumptions in its Growth Commission report having been blown asunder by Covid, they seem to remain dedicated to the ideas within it. And that includes the assumption that post-independence Scotland will run budget surpluses to build up foreign exchange reserves before deciding when it might be possible for Scotland to have its own currency. That means, in effect, that the SNP would have a policy of repaying debt.

There are numerous problems with this. For a start, as my research shows, there is no experience of any political party in the UK successfully pursuing this policy in the post-war period. The SNP would be trying to do something no one else has achieved.

Then there is the problem that all those governments borrowed for good reason; their economies needed the funding that government deficits and consequent borrowing supplied to them. Growth has demanded that governments inject money into economies to supply the money that they need to function. Scotland will most definitely need that injection into its economy post-independence. The Growth Commission plan to run budget surpluses, which is equivalent to repaying debt, will massively harm those growth prospects in that case.

And, add to that, the Scottish electorate will not tolerate the austerity that this will require. No one will vote for independence to guarantee that they are worse off, which is what the Growth Commission plan promised.

It is time the SNP revised its view of post-independence economics. It has the excuse to do so. Covid provides all the cover it needs. And the fact that almost no government has managed Covid without running big deficits and having directly or indirectly (in the case of eurozone countries) the ability to fund those via quantitative easing, provides the justification for a massive change of heart.

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There is just one further requirement to make that work. That is that Scotland must have its own currency from near enough day one of independence in that case. Nothing else will work.

The SNP is frightened of committing to such a plan. But the evidence is that no one in the UK knows how to manage an economy without deficits and a currency the country can call its own. To be credible, the SNP has to admit that. Otherwise it requires a myth-making machine to spread a take of economics as unrelated to reality as the Brexiteers promise of a post-EU land of milk and honey for all for the UK. The electorate in England might have fallen for that nonsense, but Scotland did not. Nor will they fall for the promises of the Growth Commission.

The SNP has to get its economics back on track, or it will be selling a falsehood as to how Scotland will work after independence, and that is in no one’s interests.