It is almost universally accepted that the first duty of government is the protection of its citizens. As a former Secretary of State for Defence I am only too aware of the external threats to the safety of our people and our country.
But there are other threats that I believe we have a right to be protected from – the debasement of our currency, the erosion of our earnings and the devaluation of our savings. I believe it is fundamentally wrong for governments to engage in structural profligacy, spending excessively across the economic cycle and passing ever larger amounts of debt onto future generations.
History is littered with examples of where economic failure led to compromised security. In my book, Rising Tides, I pointed out that by 1788, a year before the French Revolution, France was spending 62% of royal revenues on servicing its debt. The Ottoman Empire was spending 50% of its budget on debt interest payments by 1875 with the final repayment being made by the Republic of Turkey in 1954, even though the Empire had been abolished 36 years previously. The lessons from history are clear – if the destinations we wish to reach are security, prosperity, and honest money, then the road we must travel is that of fiscal restraint and monetary realism.
Today, I want to look at how close we are to those objectives, especially in the light of the great financial shock that came to the global economy following the events of 2008.
The policies of fiscal restraint imposed by the current government have seen our annual budget deficit fall from the terrifying heights of the 11.4% of GDP which we inherited from Labour in 2010, although at 5.7% of GDP it remains the third-highest in the EU.
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