UK must pay down debt, says Clegg
Britain must pay down its debt mountain if future generations are not to be saddled with an "unbearable" burden, jeopardising economic stability, Deputy Prime Minister Nick Clegg has warned.
In a keynote address in the City of London, Mr Clegg said that even after the current "black hole" in the public finances has been eliminated, the country will still owe £1.5 trillion - almost 80% of GDP.
He made clear that a priority of the Liberal Democrats in any government after the next general election would be to get the debt down to "sensible levels" which could be sustained into the future.
While the Lib Dem leader was critical of the Conservative approach - with plans for £12 billion of welfare cuts - he was scathing about the unwillingness of Labour to face up to the debt problem, accusing them of a "reckless" commitment to more borrowing which threatened the economic recovery.
Although Mr Clegg did not set a target for debt reduction, aides pointed to a European Union assessment that a debt should be no more than 60% of GDP to be sustainable over the long term.
They acknowledged however that getting the UK's debt down to that sort of level could take 10 to 20 years.
Speaking to an audience of business leaders at the Mansion House, Mr Clegg reaffirmed the Lib Dems' commitment to the coalition's plans to balance the books and eliminate the structural deficit in the public finances by 2017-18.
However, he said that would still leave debt at 80% of GDP - around double what it was when the financial crisis broke in 2008 - rising to 99% by 2062, according to Office for Budget Responsibility estimates.
"If we leave today's debts as they are, those future pressures will be unbearable. And, if we hand over high levels of indebtedness to our children and grandchildren, all we will do is leave them more vulnerable to inevitable future shocks," he said.
"In an interdependent global economy, downturns are inevitable. And if we go into another recession with a high debt to GDP ratio it will be much harder for us to keep the confidence of creditors, to keep the cost of borrowing down.
"And, as any good Keynesian will tell you, our ability to stimulate our economy will be massively reduced. How can any progressive advocate that? As we have seen in other European countries, when a country loses control of its finances it is the poorest who suffer most."
Mr Clegg, sought to distance the Lib Dems from the Conservatives and Labour, rejecting calls by David Cameron and Chancellor George Osborne for a permanently smaller state sector, and accusing his coalition partners of "putting ideology ahead of good sense".
At the same time, he said shadow chancellor Ed Balls's recent announcement that Labour would not balance the books until the end of the next parliament, showed they had not learned the lessons of the crash.
"Borrowing more, piling on more debt, diminishing the confidence of our creditors. But it's reckless and it threatens the stability that's been achieved," he said.
"Ed Miliband keeps promising a recovery for all. But there will be no recovery at all if you won't see through the difficult decisions and get the job done."
As the economy grew, Mr Clegg said the Lib Dems would pursue a "carefully calibrated approach", investing in public services while remaining alive to "the danger of persistently high levels of debt".
"Yes we will need to invest, my party and I have already committed in the next parliament to keep investing in the country's productive infrastructure for the sake of our long-term well-being, " he said.
"But it must not come at the expense of our long-term stability. Investing to drive future prosperity must be coupled with sustainable finances - and that's the balance we will strike.
"The Liberal Democrats will plot a course which safeguards investment, which protects future generations from future shocks and which ensures that, instead of spending more and more of our money on servicing the interest payments set by international bond traders, we spend it on the support and services the British people need."