Britain doesn’t just have a politician problem; it has an electorate problem too.
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On current trends, our standard of living will fall behind Lithuania in five years’ time and behind the Czech Republic in six.
The deadweight of taxation and debt have pushed us steadily down the league tables, from 12th place at the beginning of the century to 24th today. If nothing changes, we will fall to 46th by 2050 – a middle-income nation. Along the way, we’ll be overtaken by Romania, Georgia, Turkey and Moldova. Moldova, for Heaven’s sake.
This is not some statistical trickery, some prestidigitation with numbers. We can observe the immiseration around us. We see it in the closed pubs, the boarded-up shops, the profusion of charity and low-budget outlets. We hear it in the resigned tone of young graduates sending out unanswered job applications. We feel it in the judder of unfilled potholes under our tyres. We learn it from friends who are leaving for higher salaries and lower taxes in the UAE or Australia or even Portugal.
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As a thought experiment, imagine that Labour meant what it said about the economy. Sir Keir Starmer declares, “the number one priority of this Labour Government is growth: growth, growth, growth.” Rachel Reeves assures us that, “economic growth is the number one mission of this Government.”
If they were sincere, what would they be planning for this month’s Budget? Well, here let me turn to a book published last week, Prosperity Through Growth, by Art Laffer, Matthew Elliott, Michael Hintze and Douglas McWilliams.
They start with some basic axioms. Governments should do only what cannot be better done by others: defence, a criminal justice system, funding elements of education and so on. Once they step beyond those functions, every pound they spend means slower growth than if it had been left in people’s pockets.
Maintaining a stable currency is a core state responsibility, for few things destroy an economy as thoroughly as inflation. Protecting domestic industries is not: trade barriers, though they might for a time help one particular sector, always damage the national economy as a whole.
A snotty reviewer in the Financial Times dismissed these as “pretty orthodox” observations that “feel rather out of date”. But that, surely, is the point. We have drifted away from these basic truths, these Gods of the Copybook Headings.
This year, we will spend £303bn on benefits. It is hard to convey quite how vast that sum is. It is not only bigger than last year’s defence budget; not only bigger than last year’s NHS budget; it is bigger than both combined.
Yet there is no willingness to curtail this expansion. Indeed, Labour seems set to add a massive new driver to the growth of welfare by lifting the two-child benefit cap. That is why taxes are going up.
What would a Chancellor genuinely committed to growth be doing? Here are some of the authors’ ideas, all of them researched and tested following input from five former prime ministers, nine former chancellors and numerous Treasury officials and business leaders:
A flat tax, collapsing the various allowances, deductions and rebates and folding in National Insurance, making administration cheap and simple.
Scrapping inheritance tax and stamp duty and reversing the changes in non-dom rules that have pushed wealth-generators into emigration.
Raising the pension age in line with life expectancy and removing the triple lock.
Limiting the budget deficit and bringing down the national debt.
Liberalising the labour market and reducing the minimum wage relative to the median wage.
Scrapping the unaffordable aspects of net zero.
Freezing sickness benefits in real terms, so that any rise in the number of claimants would mean a fall in the value of individual payments.
Easing planning, and removing anti-landlord regulations.
The authors explain precisely how these ideas would work, and I won’t get into detail here. My point is simply that we are a world away from thinking about such reforms.
The growth of the state does not simply mean that we get progressively poorer, as money that could have been usefully invested is instead diverted into public-sector salaries and pensions. No, it also means that the people who are net beneficiaries of state spending become more numerous until they form an electoral block on reform.
Leave aside, for a moment, the vast number of Government employees. Disregard, too, the wider body of rent-seekers and contractors who derive their income indirectly from the Treasury. Look purely at the number of adults claiming benefits.
As Sam Ashworth-Hayes revealed in these pages this week, there are 38 constituencies in mainland Britain where more than 50 per cent of voters are on welfare; and 355 constituencies, well over half the total, where that number is above 40 per cent. No wonder ministers backed off from their attempt, however feeble, mildly to slow the rise in costs.
Labour, which represents most of these seats, has already failed. Yet it is depressing to see other parties pretending that our financial woes can somehow be solved by scrapping DEI programmes, cutting MPs’ expenses, taxing the one per cent, abolishing foreign aid or squeezing oil companies. Our big budgets are health and social security. If you don’t want to cut them, you don’t want to cut spending.
Politicians are reflecting their constituents’ complacent and contradictory attitudes. A poll this week showed that 58 per cent of us oppose any cuts in public spending while 67 per cent oppose any tax rises. We don’t just have a politician problem; we have an electorate problem.
How entitled we have become. Ours was the country of Adam Smith and David Ricardo and Margaret Thatcher, the country that introduced the world to free contract, secure property and open markets. Those ideas made us the richest nation in the world. Yet our generation cares nothing for them. We choose to disregard our fathers and disinherit our children. We choose mediocrity. We choose penury. Shame on us. DT.
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