I always appreciate seeing a reminder as to why, despite what politicians from several parties insist on telling us, managing government spending is nothing at all like managing a household budget. And thus, the logic you use when doing so should be entirely different.

What you need to do to act as a ‘responsible’ householder under the present framework is different to what you need to do to act as a responsible government minister. Pretending that they’re the same thing is irresponsible (and in fact often represents a misunderstanding of how sensible people do manage household budgets).

Aditya Chakrabortty provides a nice quick summary of many of the relevant factors in an article from today’s Guardian called ‘The cynical spectre of Osbornomics is haunting the Labour party':

…unlike individuals, nation states don’t retire or die; that no household hides a government’s printing press or tax department in its loft conversion; that most families do borrow to invest (for what else is a mortgage?) and will spend cash to keep kids from going hungry

These aren’t the only reasons. A couple more that come to mind include:

  • The choices a household makes tend to impact only themselves to any large extent. The choices a government makes can impact the whole nation, its whole economy.
  • If a household doesn’t buy a luxury holiday this year then it doesn’t necessarily affect other aspects of their budget. It just saves the holiday money. Whereas cuts to public service costs in one area for example often lead to rises in expenses for other area. A classic example of this would be a reduction in GP services tends to lead to an increased demand for (more expensive) hospital services. Sacking 1000 civil servants? That’s 1000 more people who may require benefit payments, training, education et al for a while.

This doesn’t mean a government in a country with its own currency operates with no constraints of course. Liz Truss’ rapid destruction of our economy proved that.

They’re just different, usually lesser, constraints. And at the end of the day, if it needs money to solve any given emergency, it has that money if it chooses to have that money.