If you are like me then you hate being in debt. Being saddled with money owed and having to pay it back month after month can be a miserable experience just as the feeling that comes with paying it off can be liberating. This is by no means an isolated view: recent research from the Money Advice Trust shows that public attitudes to debt have “hardened” since the credit crunch, with the majority of people “more cautious and prudent about their spending”.
We should perhaps then not be surprised that recent polling from YouGov and Ipsos MORI shows large public support for reduction measures to cut the national debt. Whilst this does not necessarily translate into support for large scale spending cuts, it does identify a significant concern about the country being so far in the red. Worries about our own personal finances instinctively translate into concerns about the national balance sheet. The public fears an overwhelming national debt and cannot see better economic times ahead until it is tamed.
Whilst in power, Labour’s attitude to debt changed over time. Despite a booming economy, the early Blair years focused on fiscal responsibility, sticking to previous government spending plans and promising only to borrow to invest. Hard work went in to ensuring that the public trusted Labour to handle the economy and not to reprise previous memories of profligate Labour chancellors ramping up spending and raising taxes.
Whilst Gordon Brown’s Treasury maintained an adherence to “prudence” throughout the second Labour term, the party’s attitude towards debt, in particular personal debt, began to change. During that period I helped to run the All Party Group on Debt and Personal Finance, which regularly heard a reassuring message from ministers that high levels of personal debt were manageable in an era of low interest rates and high employment. Rising house prices and buy to let mortgages were deemed a good thing, without any concern for what could happen should the market crash.
Very rarely did we hear a dissenting voice, arguing that people had to live within their means, that offering mortgages at five or six times the buyer’s salary was irresponsible or that regulation was required to curb aggressive money lending practices from banks. There was an implicit nod from the Treasury that high consumer and housing debt was helping to maintain growth – there was a large kernel of truth in it – but Labour seemed uninterested in helping to reward thrift and saving. The era whereby to be in debt was considered shameful had truly gone.
Following the economic crash in 2008, attitudes to debt have understandably changed. I’m not entirely sure that the Labour party has though. Whilst personal credit remains an important part of all our finances, Labour has to adapt to new austere attitudes to debt. This should involve clamping down on irresponsible lending and tackling the outrageous costs associated with buying property. It should also involve rewarding thrift by not withdrawing social services from those who have saved money throughout their lives.
On the party’s attitude to the national debt, a good place to start would be Alistair Darling’s speech at today’s Edinburgh Book Festival where he acknowledges that: ‘The electorate are very grown up. They know what the position is, they know why borrowing went up, they know borrowing has to come down’. The public want a concrete plan for getting rid of the deficit and a simple ‘Fight the Cuts’ message will not resonate, despite how ideologically driven they are by the government.
Perhaps Labour needs to find a modern day Stafford Cripps, a man who believed in austere living and rejected materialism. His views today would be hopelessly out of date, but it would not hurt the Labour party to have a few more politicians concerned with rewarding prudence and saving tax payers’ money rather than just finding new ways to spend it.