Clegg calls for action on Britain’s £1.5 trillion debt pile

Britain must pay down its debt mountain if future generations are not to be saddled with an “unbearable” burden, Deputy Prime Minister Nick Clegg has warned.

In a keynote address in the City of London last night, the Sheffield Hallam MP said that even after the current “black hole” in the public finances has been eliminated, the country will still owe £1.5 trillion – almost 80 per cent of GDP.

He made clear that a priority of the Liberal Democrats in any Government after the next General Election would be to get the debt down to “sensible levels” which could be sustained into the future.

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While the Lib Dem leader was critical of the Conservative approach – with plans for £12bn of welfare cuts after 2015 – he was scathing about Labour’s failure to face up to the debt problem, accusing them of a “reckless” commitment to more borrowing.

Although Mr Clegg did not set an actual target for debt reduction, aides pointed to a European Union assessment that debt should be no more than 60 per cent of GDP to be sustainable. Lib Dem sources acknowledged, however, that getting the UK’s debt down to such a level could take up to 20 years.

Speaking to business leaders at the Mansion House, Mr Clegg reaffirmed the Lib Dems’ commitment to the coalition’s plans to balance the books and eliminate the structural deficit in the public finances by 2017-18.

However, he said that would still leave debt at 80 per cent of GDP – around double what it was when the financial crisis broke in 2008 – rising to 99 per cent by 2062, according to Office for Budget Responsibility estimates.

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“If we leave today’s debts as they are, those future pressures will be unbearable,” he said. “And, if we hand over high levels of indebtedness to our children and grandchildren, all we will do is leave them more vulnerable to inevitable future shocks.

“In an interdependent global economy, downturns are inevitable. And if we go into another recession with a high debt-to-GDP ratio, it will be harder for us to keep the confidence of creditors.”

Mr Clegg sought to distance the Lib Dems from both Conservatives and Labour, rejecting calls by Chancellor George Osborne for a permanently smaller state and accusing his coalition partners of “putting ideology ahead of good sense”. At the same time, he said Shadow Chancellor Ed Balls’s statement that Labour would not balance the books until the end of the next Parliament showed the Opposition party had not learned the lessons of the crash.

“Borrowing more, piling on more debt, diminishing the confidence of our creditors,” Mr Clegg said. “It’s reckless and it threatens the stability that’s been achieved.

“Ed Miliband keeps promising a recovery for all. But there will be no recovery at all if you won’t see through the difficult decisions and get the job done.”