Have Lib Dems accidentally stumbled onto a good idea?

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One party which has so far failed to send any election literature to this household is the Lib Dems (but don’t bother to rush out and do it now, we’ve already voted). It’s a pity, because there is one aspect of their policy for this election which strikes me as really interesting and different, namely their promise of debt cancellation. The suggestion that this would be a funded by a ‘specific and limited pot of funding’ detracts from the proposal, with its implicit assumption that it is the funding which determines how much debt is written off rather than the need, and there is a question in my mind as to whether the Senedd actually has the power or resources to do this, but the idea deserves to be more widely debated and explored.

The Tories continually tell us that we are facing a debt crisis as a result of the pandemic. They’re right, but they’re referring to the wrong debt crisis, because they’re referring to government debt. Government debt really is not a problem, but their ‘solution’ to this non-problem, namely austerity (although Johnson will insist on calling it something different given his oft-stated aversion to austerity) will not only not solve the non-problem, but will worsen the real debt crisis, which is the extent of private debt burdening lower paid families. Apart from austerity, the second part of the government’s post Covid recovery strategy assumes that, as a result of lockdown, people have been spending less and that spending will be released in a splurge when people can start going to restaurants and hotels and taking holidays again. From the perspective of the social circles in which the Tories move, that may well look to be realistic, but for many families, reduced income as a result of furlough, and the fear of job insecurity as furlough ends and some companies find themselves no longer viable means that many have fallen further into debt, and even amongst those who have seen an opportunity to reduce their debts – or even save – it doesn’t follow that they will be ready to risk their financial security immediately.

Debt cancellation is not a particularly new idea; it’s been done in various economies in the past, sometimes in the form of a general amnesty, other times in the form of write-off of specific types or elements of debt. Amongst the earliest examples was the ancient civilisation of Mesopotamia, which went through a series of cyclical cancellations of debt, aimed at freeing debt slaves and maintaining social peace and stability. Whilst people are not, these days, forced into slavery as a result of debt, they often find themselves forced into taking multiple jobs, depending on friends and family, or sinking deeper into debt. And the driver of debt cancellation for King Hammurabi – social peace and stability – is as valid and relevant today as it was 3000 years ago.

The idea goes against current economic orthodoxy, of course, to say nothing of the idea that the poor deserve to be poor and that people who get into unmanageable levels of debt deserve their fate. But these are shibboleths of capitalist ideology which need to be challenged, and selfishness needs to be replaced by a greater sense of social solidarity. The Lib Dems, albeit in a typically timid and limited Lib Dem fashion, are actually onto something important and radical here (although any of them reading this might now start to have second thoughts). It’s a proposal which deserves to be more widely considered, and taken up by others who are more likely to be in a position to do something about it than a fringe party struggling to retain a foothold in the Senedd.