We need to face facts. For reasons that are deeply contested between the parties, we need to reduce the deficit – the gap between what we raise in tax and what we spend – and we also need to reduce debts.
Interest payments account for some of the deficit, although there is a strong case for some borrowing to invest in infrastructure which boosts growth, increases tax revenues and helps close the gap.
In this way we can build a sustainable base for the public services that we need – especially in a society that is enjoying the fruits of medical advances and whose population is living longer. This adds to the cost of health, caring and pensions.
The question has always been over what period this is done and how the burden is shared. I have always thought that the Conservatives had the right slogan – that we’re all in it together – but one that was mocked by the way that they reduced the burden on the better off.
One of the first things they did was to reduce the top rate of tax from 50p to 45p. Now Ed Balls, the Shadow Chancellor, has committed the next Labour government to temporarily reinstate the top rate of tax to 50p for those earning £150,000 or more a year.
It is justifiable because it signals that reducing the deficit will be done on a fair basis. It’s only right that we should all share the burden.