WE HAVE SEEN how Britain is failing. Its growth rate per head has collapsed to the worst in 200 years and the country is in relative global structural decline. We have seen how the State has, over the last twenty years, come to dominate the UK growing from a third of the economy to almost half and how this underestimates the state’s reach given the exponential increase in regulation.
We have seen how taxes have increased to an 80-year high but despite this the national debt has increased from around £395bn in 2000 to £2,770bn today and we have seen that the likely Labour response is to ask for yet more while feathering its own grossly inefficient public sector. We have argued this risks capital flight, further undermining growth as the UK enters a ‘death loop.’
We have even seen how the OBR has done us a favour by clearly articulating that without a change of tack the state will continue to grow to Soviet levels of 60% of output and the national debt will become unsupportable.
What we have not seen is any acknowledgement from the major two parties of the unsustainability of this path; either economic or moral, nor any attempt to change tack. So, is this decline inevitable and we should just get used to it as we slowly become ants working to keep the state edifice alive, for that is the consequence of the current trajectory?
The good news is it is still saveable. Just. But only if politicians are honest about the challenges ahead and prepared to radically change direction.
Firstly the UK remains blessed with a number of world class assets. The brand is tarnished but not irrevocably so. The UK remains a global leader in many fields; notably finance, a large range of business services including legal, architecture, logistics, bio-science, niche aspects of engineering, elite education, culture, sport and arts to name but a few. These are generally growth industries with a high value added content. They need to flourish, not with the unhelpful regulation or ’guidance’ from government but their own ingenuity.
How can this be achieved? Quite simply by creating an environment where families and companies can use their instinct to succeed. Today the environment politicians create is quite the opposite.
Finance is strangled with regulation to the point where the London Stock Market is in danger of relegation, elite schools and their more modest brethren are hampered with new tax, when actually unleashing them with tax credits, not VAT, would enable them to grow reducing pressure and costs on the public education budget. Energy costs soar to three times what the average US citizen pays to meet the arbitrary goals of an ideological crusade. How can anyone plan in this environment when there is no certainty, just arbitrary big government?
The first task of a good government is to constrain the growth of the State. Spending at £42,000 a household is absurd and totally disproportionate. The extra £200bn in real terms since the lockdown must be clawed back. It is abundantly clear this excess money has gone into a black hole with, in many cases, service deterioration.
Sure, the civil service will squeal. Let it. On day one all departments should be told 10% cut forthwith. This is small beer and while naysayers will say ’it can’t be done,’ it can and must. Services were way better on less money previously. 10% across the board would save around £60bn or 5% of the budget as debt interest, pension obligations and other legally contractual obligations would need to be met. I would be seeking a further 10% in year 3-5 and then another.
Second, I would encourage the private sector. Tax credits for those opting out of public services be that education, health or the like. This would create genuine competition, benefit those who wished that NHS hip operation as there would be less of a queue and raise standards. How much would this save? Hard to be sure but over time it would garner substantial sums.
Third, it is a tragedy that over nine million working age people do not seek gainful employment and it is inexplicable as to why the OBR expect that this will continue to rise. The disability budget, as an example, is projected to increase from £39bn today to £58bn by 2028.
The previous government materially increased benefits way beyond salary increases, reducing working incentive. We should be clear that benefit is a base line required for genuine need thus government should reappraise recent generous rises capping benefits to, say 2020 levels, in real terms. Coupled with this reform of both the state pension, breaking the triple lock and redefining public sector workers’ future pension entitlements aligning with private sector norms would, in time, cap an unfunded pension liability currently estimated at £1.3 trillion and rising.
Social protection costs over £360bn each year, or £12,800 per household and despite near full employment continues to rise well ahead of CPI. This is unsustainable and is breaking the work ethic. Re purposing welfare payments and amending pension arrangements as described would save around £20bn pa compound.
Fourth this country worked way better a generation ago than today. A good government should re-analyse each piece of legislation passed over the last decade with a presumption to repeal unless there is strong reason not to, reducing the regulatory burden and cost. Lastly, I would bring quango’s in-house making them truly accountable to parliament and budgetary and spending scrutiny. As an example do we really need to spend £750m pa on the Financial Conduct Authority whose budget and remit constantly expands? Of course not.
There are lots of other cost saving ideas. Perhaps one should need to be a UK citizen before ‘free’ entailment to benefits, education and health? Perhaps the pull to the UK might be slightly less if people who had not contributed were not entitled to the whole spectrum of benefits citizens are?
I am in no doubt in year one we could find £60bn of near immediate savings and by year three given compounding effects and some of the changes in behaviour the savings would be well over £100bn. That’s a very modest target given the rip since it started with Johnson’s Government of 2019.
What do we do with all that cash? Spend in on HS3? Of course not. It is your cash and it would be entirely recycled into tax cuts.
Outrageous, impossible, disgraceful!
Well, even if a quite good government enacted my proposals it would still leave our state bigger in real terms than 2020 and tax still be the highest in 75 years. But it would be a start and it would signal hope. Out of that modest acorn, the family, the very bedrock of a stable society would flourish and growth would flow, empowering the people and also in the long term securing public services. We have so many advantages. We have done it before, once the scales are lifted from our politicians’ eyes we can do it again.
If you appreciated this article please share and follow us on Twitter here – and like and comment on facebook here. Help support ThinkScotland publishing these articles by making a donation here.
