THE DEFINING economic legacy of the Starmer government will not be any single tax rise or employment reform. It will be the acceleration of Britain’s transition from a wealth-producing economy towards a state-dependent one.
In one respect Britain’s economic malaise is not the fault of Kier Starmer. The edifice has been consistently undermined over the last 25 years with an extraordinary expansion of the state in almost every regard. Starmer can’t be held solely responsible for that.
He can and should be held responsible for undermining the edifice further. The basic error is this quaint belief that the Government knows better than you. He has applied this in spades almost universally in energy policy, taxation, regulation, financial rewards to the public sector, employment law, increasing alignment with the EU and an attack on independent schools.
In every case except independent education, he has taken a weak position, drawn the wrong conclusion and further undermined the structure. His premiership will, at most be a footnote, largely forgotten in time, as there was no grand change of direction, or indeed success to trumpet, just a quiet tightening of the screw.
There are so many poor decisions he and his team have made. A special mention would go to the added costs to employing people and the huge commensurate increase in employment regulation, much of its impact still to come, via his Employment Rights Act. This coupled with increased NICs for employers and an unsustainable rise in the minimum wage has undermined whole industries, especially hospitality, building trades and retail.
Perhaps, however, the biggest error was a silent one. The extraordinary increase in public sector salaries since he took office in July 24, at just over 10 per cent on average, substantially ahead of the 6 per cent average rise of the private sector taking median public sector pay to almost £41k almost – £3k higher than the private sector – reversing what used to be the private sector premium not so long ago over the public sector.
It might seem odd to focus on this when there is so much else amiss but the impacts are substantial; economic and cultural.
It rewards the public sector for productivity that is in gross decline. The ONS’s own data suggests public sector productivity is lower than in 1997 – despite all the technological improvements that have occurred in the last thirty years. That is truly extraordinary.
It crowds out the private sector – for salaries are not just £3k higher, so are the benefits. Final salary pension’s schemes are typically worth 30-40 per cent salary many times what a typical private sector benefit averages. Unless one breaks the woke cathedral it almost impossible to get fired. Not so in the private sector – and so it goes on. One could argue that total compensation in the public sector is 30-40 per cent higher than in the private sphere. Regardless of the basis one believes, public sector pay has mushroomed.
It embeds public spending in the long term as attached to these pay rises are public sector pension liabilities which increase commensurately. Measuring the scale of this liability depends on actuarial assumption but conservatively lies between £1.6-£2.2 trillion adding a further largely unfunded liability to the public finances. These large numbers trip off the tongue but that’s an unfunded liability of somewhere between £50-75k for each for every household in the land. To reward general failure is not bright. It almost encourages poor practice.
It’s a two tier land. Two tier justice, two tier policing and two tier pay. One based on the market rate the other based on an often cosseted and grossly inflated rate. Is Starmer stupid? Not at all. He’s well aware of what his Government is doing and he wishes it that way, for in his two tier vision it’s not about personal choice and decision it’s about following what the State things is right.
The effect of these policies is to expand the relative advantages enjoyed by those employed by the state. Whether intentional or not, the result is a growing divergence between the fortunes of those dependent upon government and those operating in the competitive economy. A similar analysis could be constructed of the £170bn or so that is spent each year on working-age benefits. They too have been feathered.
East Germany differentiated between the privileged Parteifunktionäre, the government or party worker and the rest, Handwerker. If they had not been so generous with the Parteifunktionäre and their gifted privilege the Wall might have come down sooner. And Starmer is embedding this here rewarding certain with crumbs accordingly regardless of performance. Sure, not as blatantly as in East Germany but far more subtly. Quietly he is making a new class of Parteifunktionäre here in the UK.
The message is subliminal. Get with the programme. Come and join the revolution. You are on the public sector payroll now. We’ll stuff you with gold. Wear a lanyard and occasionally think about doing some work.
The flaw in the argument of course is the wealth of the nation is ultimately based in its productive capacity – manufacture, service, and intellectual and that is in structural decline, stifled by Government though tax, regulation and cost. But in Britain today we have our very own elite class, the public sector worker. Starmer’s legacy was to cement that. Not to rule for the nation, but to rule for his party’s own tribe.
That is an awful legacy.
Starmer deserves to be remembered for his inconsistencies and two tier favouritism. He forgets governments ultimately live off the wealth that private enterprise creates. When policy consistently shifts resources, talent and incentives towards the state rather than productive activity, the result is slower growth, weaker public finances and fewer opportunities for future generations. If that trend continues, Starmer’s lasting legacy will not be any individual reform but another step in Britain’s long retreat from economic dynamism.
Established in 2006 and celebrating twenty years, ThinkScotland is not for profit relying on donations to publish our wide range of opinions. You can subscribe to our FREE newsletter here – share and follow us on ‘X’ here – like and comment on facebook here and make a donation here. Every contribution helps to meet our overheads.
Photo of farmer’s protest by Cory Doctorow – https://www.flickr.com/photos/doctorow/54152471911/, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=155470414
