BrewDog co-founder James Watt has claimed that “liberal democracy in the UK is facing an existential crisis” because the interest being paid on UK government debt “makes it almost impossible for us to get our governing system back into balance.”
In a social media post, Watt argued that the “only possible way out is to entrench a new provision in our constitution that makes it illegal for any government to further increase our national debt during their term in office.”
Watt wrote that this state of affairs, unless checked, “can only lead to the self-destruction of our governing system.”
Watt argued that unless things change dramatically in the UK and “we can get our national debt back under control” whilst ensuring the UK has the requisite conditions for economic growth “it may already be too late for the UK.”
On September 20 it was announced that UK government debt reached 100% of GDP for the first time since 1961 after another large budget deficit in August, adding to the problems that new Labour finance minister Rachel Reeves has inherited from the previous Conservative-led Westminster administrations.
The UK’s Office for National Statistics (ONS) said on September 20 the UK’s public sector net borrowing excluding public sector banks (PSNB ex) at the end of August was £2.768 trillion.
Watt wrote:
A CEO’s perspective on the state of our nation: Liberal democracy in the UK is facing an existential crisis.
Before I elaborate, this is not about party politics. I remain agnostic. After 14 years of Conservative government things are as bad as they have ever been.
If the national debt continues to increase (which unless something fundamentally changes it will) then the interest that we have to pay merely to service this debt makes it almost impossible for us to get our governing system back into balance.
This state of affairs, unless checked can only lead to the self-destruction of our governing system:
1) Taxes continue to increase.
In a few weeks, Labour will push taxes well beyond their previous high-water mark. The average UK family can expect 75-80% of the money they earn to end up as tax.
2) The level of services that we, as taxpayers, receive in return continues to decline.
Prisons are so full they are releasing dangerous criminals onto our streets and NHS waiting times have never been longer.
3) The national debt burden continues to skyrocket.
As taxpayers, we pay over £100 billion every year (over £300m each day!) just to pay the interest on the money which successive governments have borrowed on our behalf. The level of services we receive will continue to decline rapidly because so much of the tax we pay just goes towards paying the interest on our debt.
4) We are removing incentives at pace.
As taxes surge, there are fewer and fewer incentives in the system for job creators and wealth creators. Quite simply this means they will create businesses, jobs and wealth elsewhere in the world.
Politicians are so keen to throw mud at each other that economic policy becomes conflated with political point scoring. The row over the ‘£22bn black hole in the economy’ is just the most recent example.
We are having political arguments on topics that should not be political. As soon as you politicise arguments which should be grounded in economics you completely lose control financially.
Most political discussions should actually be grounded in economics primarily – with maximising the economic prosperity and wellbeing of UK families being our only north star.
In business first and foremost you need to balance your books, only thereafter do you earn the right to discuss strategic options. The same principle needs to hold true for our governments.
The only possible way out is to entrench a new provision in our constitution that makes it illegal for any government to further increase our national debt during their term in office.
But sadly, this is something that our politicians would never do.
Unless things change dramatically and we can get our national debt back under control whilst ensuring we have the requisite conditions for economic growth, it may already be too late for the UK.