During the recent election campaign debate Amber Rudd poked fun at Jeremy Corbin by suggesting that his policies were funded from a mystical ‘Magic Money Tree’. As it turns out she was far closer to the truth than she might imagine.
Unlike us, governments do have access to a ‘magical money tree’ of sorts – and I’m not talking about simply printing money. They are not tied to a single human life span and so have the ability to borrow ‘over the long term’. In essence one generation can borrow on behalf of the next (or indeed several generations into the future). As such they have access to an almost endless source of money, with one big caveat – we are asking our children and grandchildren to pay the bill.
Now it makes perfect sense to borrow this money if the expenditure really is an ‘investment’ on behalf of future generations and if we invest wisely they will thank us for our foresight. However, the gratitude of youth is not guaranteed and ‘investing’ for the future is not without risk.
Describing day to day running costs as an ‘investment’ is a fallacy. If we overspend on the health service today and plug the gap with borrowing we are simply making our children and grandchildren pay for our care – they will not thank us.
Building infrastructure that is too costly to build and too expensive to run is simply adding to the financial legacy we pass on. Look on-line for a video of the Canadian government blowing up a brand new hospital as they had determined it was simply too expensive to staff and run.
So Corbin is right – governments do have access to a magical money tree, but they need to be very careful before shaking it too hard and be conscious of the burden we are creating for future generations…..