When prime ministers use to care about the public finances

By: Elliot Keck, head of campaigns

Sir Keir Starmer in his first speech as prime minister pledged a “return of politics to public service.” Whether or not his early weeks in government have demonstrated this promise made on the steps of Number 10 Downing Street, there’s no doubt that this idea of a “politics of service”, or alternatively “government of service”, has been a guiding light of his administration’s rhetorical offering, with the phrase repeated in his speech earlier this week.

What does a “politics of service” actually mean, though? It’s surely got to be more than just handing out public sector pay rises and setting up new quangos. Well, an instructive example can be found in the example of a former Conservative prime minister, Stanley Baldwin, who served three terms in office during the 1920s and 1930s. 

Baldwin certainly has his admirers, even if he doesn’t have the star power of some of his fellow occupants of the office of prime minister. That lack of star power is actually precisely his appeal to many.  The historian and presenter of the Rest is History podcast, Dominic Sandbrook, describes Baldwin as “a walking rebuke to his modern-day successors” and “a far more interesting character than almost all of our current MPs put together.” Bemoaning the fact that he’s little remembered today, Sandbrook writes that “whenever people lament the passing of an age of decent, serious, public-spirited politicians, they could be talking about Stanley Baldwin.”

There’s certainly a lot of truth in that description. In 1919, not long before he became prime minister, Baldwin did something that is frankly impossible to imagine a modern-day prime minister doing. He used his own wealth to pay down the UK’s national debt. And did so anonymously, without a press release, a speech, a briefing to a friendly journalist, or a tweet. The national debt was £7.4 billion at the time, he paid off £120,000 of it.

That means that Baldwin paid off approximately 0.002 per cent of the UK’s national debt. Not a huge dent, perhaps, but undoubtedly an act of service to the country. What would the equivalent be today? Well, according to our debt clock, as of 13:20:13 on 28 Aug 2024, the UK’s national debt stood at £2,547,092,153,330. If you were to look at the figure now, it would be markedly different, given that the debt is rising by £4,410 per second and £381 million per day. But it’s well over £2.5 trillion either way. The equivalent amount that a prime minister would have to pay off now to reach the level of Baldwin would be over £50 million

Now, Starmer certainly couldn’t afford that, but Rishi Sunak could, multiple times over, but the country need not hold its breath. It seems to go without saying that no any prime minister ever again likely to use any of their wealth for such a venture. We’ve now reached the point where the national debt is seen as something to simply be ignored and instead pushed onto future generations. It’s become so big that many believe it is hardly worth tackling. The country won’t ever really run out of money, will it?

This attitude has gone so far that one of the other great contributions to paying off the national debt was the subject of a recent campaign to essentially reject it. In 1927, a few years after Baldwin’s own contribution, an anonymous donation of £500,000 was made on the condition that it should be “retained and accumulated until either alone or with other funds it was sufficient to discharge the national debt.” Ever since then, this has been held in trust through a charity known as the “National Fund”, with this additional donation plus others rising to almost £600 million in 2022. 

Until recently, this pot of cash was simply left and allowed to grow. But a few years ago a political battle opened up over the use of the funds. Very reasonably, the conclusion was reached that there was no realistic prospect that the fund would ever be sufficient to pay off the national debt and as a result the cash would simply sit there in perpetuity. Alternative proposals were therefore made, including for the fund to be used to create a new Sovereign Wealth Fund, or to be disbursed to charities during the covid pandemic. As the National Council for Voluntary Organisations argued: “there is a sound legal basis for the National Fund to distribute funds to good causes, unlocking resources and allowing charities to do more to support recovery efforts at no cost to the exchequer.” 

It was clear that the national debt was seen as so irrelevant that it was absurd to even consider using a pot of money created explicitly for the purpose of paying it down to actually pay it down. Fortunately, the Attorney General at the time viewed things differently and in 2018 applied to the High Court for the money to be released so that at least part of the national debt could be paid off, in keeping with the fund’s original intention. A court case ensued, but ultimately the decision was to use the money as it was intended, to pay off the national debt. 

The legal battle over this cash was instructive though. It was born out of an attitude prominent at the time that the era of cheap money would never end. We now know that was misguided. The cost of servicing the debt has now shot up to over £100 billion in just one year. If paying the interest on the debt was a government department it would be the fifth largest by cost. If only we had politicians who cared as much about the nation’s finances as Stanley Baldwin.

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