The definition of addiction is the serious, chronic dependence on a substance or activity. After watching the Chancellor spend almost an hour trumpeting eye-watering increases in public spending, we now have every reason to believe that this government is hooked on splashing taxpayers’ money.
The next immediate hit – securing a headline about another couple of billion splurged on some supposedly worthy project – overshadows any concerns about long-term health and rehabilitation.
The Chancellor was given the gift of unexpectedly good fiscal news and additional budgetary headroom.
Instead of prudently banking these savings to pay down the UK’s vast debt sooner, he sought the immediate rush and a short-term high of extra spending.
Just like a serious drug addiction, each dose actually represents a trend towards inevitable decline – none of them so great as to destroy everything immediately, but each a stepping-stone on the path to ruin. Every time, they promise “once more, then I’ll change” and commit to imposing new rules on themselves. But each set of fiscal rules falls by the wayside when the itch starts. Since 2010 there have been five different sets of fiscal rules by different Chancellors, and each has been abandoned when they became inconvenient. One has to wonder how long the most recent set will survive.
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To witness the announcements from the government, you would think that the Treasury was so awash with cash that it is desperate to find things to spend it on. A £6bn uplift for the NHS? Consider it done. Time for a pay rise across the public sector? Let’s do it. Topping up local transport budgets to £7bn? Why not? But the overall state of the public finances tells a very different story. The on-balance sheet debt is close to 100 per cent of our total national income. Once our known future liabilities are taken into account, it’s more like 600 per cent.
Tax take as a proportion of national income is now at its highest since Clement Attlee’s post-war socialist government.
This year marks the 20th anniversary of the last Budget that rendered a surplus. At no stage, after over a decade in office, have the Conservatives managed to spend less money than they are bringing in. Any attempt to do so would now be painted as a “return to austerity”.
In the decade to 2020, under the Tories, government spending increased by 35 per cent, or by £240bn. And before you think this was merely an aberration thanks to Covid, the amount spent in 2019 was £150bn, or 22 per cent more than in 2010.
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This spending has included, despite the constant state of winter crisis that the health service finds itself in, an effective doubling of the NHS budget. If this is anything remotely akin to austerity, one dreads to imagine what largesse might look like. Last year saw eye-watering levels of emergency government spending – footing furlough, universal credit uplifts and other support measures.
Even fiscal hawks accepted that depths of a pandemic might be the sort of time that deficit spending is justified. However, the pressure for such emergency measures to be rendered permanent – notably the din of voices calling for the £20 per week universal credit uplift – shows the lack of basic mathematical accounting that now afflicts discussions over public expenditure. Ending a one-off temporary rise in welfare benefits to deal with an emergency was in danger of being portrayed as a vicious cut.
Worse still, the public finances might be in a much poorer state than any official statistics acknowledge. According to research released by my own Institute of Economic Affairs this week, the annual costs of public sector pensions could be double what the government accounts claim.
Every year, the budgeted cost of pensions for the NHS alone is £17bn less than what is paid out. -If this were replicated across the public sector, the amount of unfunded pension liabilities each year would reach £57bn, more than the cost of the entire NHS payroll.
Yesterday, we witnessed a Chancellor who promised prudence. Just not yet. Sadly that’s not the sign of a strategy – but of an addiction. Let’s hope we can wean him off it.