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Weekly Update 28/06/2010

Posted by Jacob Rees-Mogg, MP for North East Somerset, at 15:55, Thu 1 July 2010:

‘To tax and to please, no more than to love and be wise, is not given to men’. This view of Edmund Burke – the famous Bristol MP – is as true of spending cuts as it is of tax. Normally a budget that cuts and taxes would not but popular but George Osborne’s statement has been greeted with relief.

Countries may no more live beyond their means than individuals. Their means may be greater, their taxing and borrowing powers more extensive but eventually the books must balance. In recent years this has not been the case. Excluding the effects of the recession we have been overspending by about 5% of GDP.

This could not continue for three reasons. First, borrowing is a tax on future generations and it is wrong to pass our extravagance on to our children. Second, the only real buyer for government bonds last year was the Bank of England so there was little real demand for our debt which could have led to a crisis. Third, mortgage rates are broadly based on long term debt which gets more expensive if government debt is rising so households are directly hit by fiscal incontinence.

In the long term high debt levels are bad for all of us. In the short term cuts are painful and unpopular. The coalition has done the right thing for the nation and for future generations. When the details of the spending review become clear in October it will have a political cost but one worth paying.