There's not a huge amount of money there; I know the scale of the challenge I inherit’

Rt. Hon. Rachel Reeves, UK Chancellor of the Exchequer

The UK's ‘first-past-the-post’ system produces some stunning results. The Labour Party now occupy over 63% of all the seats in the new parliament, notwithstanding a voting share of just 34% — which drops to just 20% of eligible voters when the low turnout is taken into account.

After the devastating mauling of the Conservative party by Reform, whose voting share was 41% of Labour’s but who received just under 1% of parliamentary seats, it will take more than licking wounds for the Tories to recover. Under a proportional representation system, the combined number of seats for Conservative and Reform would have been nearly 12% higher than Labour’s — but imagine the chaos that would have generated.

So although the voting levels don't support the outcome, we nevertheless have a strong Government which is keen to demonstrate its financial prudence. And that's just as well because, notwithstanding the stealth taxes applied by freezing tax thresholds, the scale of UK national debt — both nominal and ‘real’ — Is mind-boggling, as Rachel Reeves acknowledges in taking up her new role as Chancellor.

The Taxpayers’ Alliance provides a succinct summary of UK national debt, which the Office for Budget Responsibility expects to rise to £2.8 trillion in 2025 — more than the forecast level of GDP. But there are at least two other hidden liabilities, the largest of which are the unfunded state pension and public sector workers’ pensions, which are estimated to reach £9.1 trillion during this financial year.

Another liability is for HM Treasury to compensate the Bank of England for losses incurred in selling off government bonds acquired during Quantitative Easing. This introduces a more immediate, albeit much smaller, burden of £165 billion, which crystallises under the HM Treasury indemnity as and when gilts are sold.

Of course, the new Government will point fingers at recent excesses such as the over-generous level of furlough payments during the pandemic and the Truss mini-Budget (although the impact of those forty days was very minor compared with these other issues), but it's the legacy of seventy-five years of universal welfare which has really done the damage. Short-term political horizons have protected ‘free-at-the-point-of-use’ universality at all costs, and the debt required to support it has climbed remorselessly.

But that does no favours for democracy, either in the United Kingdom or overseas. It not only hangs a massive albatross around the necks of Government, but it also puts an unacceptable burden on the future generations who will have to repay it.

And speaking of those younger generations, they are increasingly saddled with their own student debt before even starting their working lives: it’s estimated that 1.8 million people have loans of over £50,000, and that this obligation will accompany them until they're well into their fifties.

Martin Lewis, interviewed last week on the BBC Today Programme, explained that this was more of a ‘graduate tax’ (although politicians don't like to describe it as such) than a debt in real terms, due to conditional repayment arrangements. However, the psychological damage of being told that you owe a substantial debt over decades of your working life is enough to put young people seriously off any thought of buying their own home. This is borne out by the significant increase in the average age of first-time house buyers.

Debt should not be a psychological burden, either for young people or for democratic governments. Its purpose ought to be enabling opportunities to be taken, not to suppress hope.

So I hope our new Chancellor, whose Bank of England experience has equipped her well to understand these economic dynamics, will seek a new way forward so that debt can be brought under control.

The key enabling methodology is a thorough investigation of the scope for inter-generational rebalancing. With a huge majority in parliament and a full five-year term ahead of them, it should be possible to analyse and take action on the unfairness of public sector interaction by age cohort.

One of the most direct examples is the universal application of health and social care: is it really right that old folk, who draw down on them far more than the young and, as a cohort, possess substantially more assets, should receive these services free irrespective of their wealth? Our proposal for mandatory private health insurance for wealthy old folk could significantly help resolve these demands on the public purse.

A broad analysis should be undertaken across all age cohorts to help us rebalance fairness across the generations. Meanwhile, let's thank our ‘first-past-the-post’ system for giving us a clear mandate for planning the future, something not generally accessible throughout countries in the European Union.

Gavin Oldham OBE

Share Radio