The Institute for Fiscal Studies has once again published its Green Budget and my word does it make for sobering reading. In short, there is no money for tax cuts or spending increases, as low growth and higher borrowing costs are squeezing the government’s finances.
Massive tax rises are already on the way, hard wired into the next budgets, as tax bands and allowances will be frozen. This is going to bring in tens of billions of tax revenues in the next few years, but the government will still have to borrow at above trend levels and at above normal interest rates to make ends meet.
There is no feasible way that government spending can be cut to make room for tax cuts. It is already quite unlikely that even the current intended spending cuts can be achieved.
On top of all that, both the Government and the opposition have committed themselves to higher spending on the NHS.
As the IFS makes clear: “UK GDP is still 5.2% short of its 2012-19 trend: a worse relative performance than either the United States or the Euro Area where the shortfalls range between 2% and 3%.” So, the UK seems to be underperforming even when compared to the Euro Area. It is also expected to enter a recession early next year, as are quite a few other parts of the world.
It is, to be frank, a complete mess; a wasted decade of austerity, low growth and fantasy economics have brought us here. Meanwhile infrastructure is crumbling, teachers and doctors pay has been slashed, prisons are full, the court system is near collapse, defence spending is “under review” yet again and nothing works.
It is quite simple. The evidence is there for all to see. Those people who told you they could do more with less were lying.
Yet we will still have to listen to Liz Truss propose an alternative budget before the real Autumn Statement, when she will doubtless try to push her mad ideas of huge unfunded tax cuts for millionaires (again) which will magically pay for themselves, all the while claiming that she and her policies have been betrayed by the woke anti-growth traitors of the liberal elite.
The really worrying thing for me, therefore, is not that we are in a mess but that the people who got us in this mess are in denial about their part in it. Even when their fantasies nearly bankrupt the country, crash the markets and lead to a lettuce outlasting the PM, they just keep coming back, promising ever more cakeism.
Until the debate shifts, until austerity is recognised as a failure, until cakeism is seen as impossible, and trickle-down economics as a con, nothing can really change.
Because currently the terms of the debate make proper reform and a proper recovery impossible. That will mean not just a general election defeat for the Conservative’s but several.
This mess will take decades to put right – if it can be put right at all.
You can read more from Jonty Bloom on Substack at Jonty’s Jottings