2024 was very different<\/p>\n
In 2024, the economy was still suffering from the 2008 economic crisis, Brexit, and Covid. Any one of these alone would have been a devastating blow. Austerity policies had dramatically cut back most public services. And war, for which we were seriously underprepared, had returned to Europe. GDP growth had stalled, inflation was at 3% and rising, government debt <\/a>was the second highest since 1993, and debt servicing costs had doubled in a year.<\/p>\n In the 2024 election campaign, desperate to avoid the traditional attacks over Labour\u2019s financial competence, the party made what now seem to be some unwise promises about fiscal policy. People were reassured that It was safe to vote Labour because there was to be no rise in the major taxes: Income Tax, VAT or National Insurance. Few listened to the economists who warned that those promises would tie the hands of a new government facing massive challenges.<\/p>\n Labour won a large Parliamentary majority, but with the smallest vote share of any government for a century. Without that promise, they might well have lost. But it was a poisoned chalice.<\/p>\n Long-term structural challenges<\/p>\n The challenges we face now are much more than putting right the mistakes of a decade of incompetent government. Four major long-term structural issues are driving up costs for government<\/a>. All are likely to outlast this government:<\/p>\n The ageing of society is unavoidable. Rising life expectancy has not been matched by longer healthy life. More older people means more health and social care needs, and both systems are already struggling. But it also means more pensions to be paid for. The Office For Budget Responsibility predicts that if the triple lock on state pensions is retained, that alone will treble government debt as a percentage of GDP from its present 96% to an implausible 270%. But old people vote.Debt, as a proportion of GDP has been rising rapidly. Over the last five years, it has quadrupled from \u00a325bn to \u00a3111bn. The interest charges now take 8.6% of government expenditure. And a quarter of that is owed to foreign investors. As they see the precarious state of the UK economy, they demand higher returns on their loans, pushing this still higher.Productivity in the UK has been stagnant since 2008. Where there have been gains, especially through the adoption of new technologies, the benefits have not gone to the workers, many of whom have been laid off as a result, nor to the people in general, or the government, but to a small number of foreign plutocrats.Climate change continues apace. The costs of preparing for, and recovering from, major incidents must rise, as will the costs of adapting buildings, agriculture, water supply and flood defences. A new green economy may create jobs but it looks more like running to stand still.Demands<\/p>\n It is against this background that the government faces a host of immediate demands for more money. Fixing any of them would bring long-term savings but increased costs during the transition. The government is making efforts to address all of them, but without a radical rethinking of the finances, it is difficult to see how they can be resolved. They include:<\/p>\n Defence. Since the end of the Cold War, defence spending has fallen, matched by rising health expenditure. This trade-off has come to an end. War has returned to Europe, and the Robertson review<\/a> confirmed that our shrunken armed forces are poorly prepared for a 21st century war. So, the government has committed to a major increase in defence spending.Child poverty. Over 30% of children now live in poverty<\/a>. This limits their health, education and life chances. They will not become the happiest or most productive adults. When the Child Poverty Taskforce reports this year, it will probably call for more spending.Social care. The system is chronically underfunded and fails to provide the quality of life which most people would expect. A review is in progress<\/a> but politicians have repeatedly commissioned reviews and then dodged the implications of their recommendations on cost grounds.Justice. The criminal justice system is on its knees<\/a>. We are spending a fortune on a failing system. The court backlog is huge, with remand prisoners adding to overcrowded prisons. Ironically, the prison system, unable to carry out its function to rehabilitate prisoners, is generating more crime and more pressure.Housing. There is a chronic housing shortage with absurd price escalation and an exploitative rental marketA hard truth<\/p>\n Our politics and the electorate have still to grasp the scale and seriousness of these challenges. This is not a matter of fixing a \u00a320bn \u2018black hole\u2019, important as that is. Neither tidying up the current systems, nor \u2018burning them down\u2019, will address the big structural issues. And nor will a one-off wealth tax<\/a>.<\/p>\n We have a deeply unequal society, and much might be achieved if we could distribute resources more fairly. But we have been living beyond our means for a long time, deceived by myths of a powerful past. Most people don\u2019t grasp the scale of the problems.<\/p>\n It\u2019s time to face the hard truths. But who votes for a party that tells them that?<\/p>\n
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