Rachel Reeves, the Chancellor of the Exchequer, is expected on Monday to give a statement on public spending ‘pressures’ amounting to tens of billions of pounds. It is not credible to suggest this will be a surprise, as Paul Johnson of the IFS explained on the Today programme (07:37).
Either it will be a restatement of what is already known – in which case any claim this is a surprise is frankly dishonest – or it will be a wish list of spending which government departments would really like and may have bid for in spending reviews – in which case elements will range from the unaffordable to the fanciful. Reeves is not at all likely to raise taxes on Monday but instead to set the scene for rises later.
It is Rachel Reeves’ first major misstep. Not because the Labour Party promised not to raise taxes on working people: this early in the parliament, as politicians so often do (alas), they may simply break their promises, blaming their predecessors.
It is a major misstep because with taxes at historic highs, and likely at or beyond Britain’s taxable capacity, Reeves would be telling us an unspoken truth which undermines her party’s faith in big government: that the UK cannot afford the state we have. She would be right and the Conservatives should point that out.
Atlas is shrugging: the public cannot afford the burden of the state placed upon them and on which so many are dependent: not now and not into the future. A time for choosing is fast approaching, probably at the next general election, once Labour have further tested the limits of their ideology of the big, entrepreneurial state.
With more people living longer and so many people dependent on the state for pensions and healthcare, the UK faces an exceptionally serious problem which must be solved. It is repeated elsewhere.
Throughout my time in parliament, I explained politicians have long been selling cruel fairy tales of unaffordable benefits. Cruel because so many people rely on promises which ultimately cannot be kept and, in so far as they have been kept over my lifetime, that has arguably been through methods which insidiously manufacture injustice in ways which are barely understood.
These problems are now crystallising and seem set to work themselves out dramatically and continuously over the next 20 years and beyond.
We have not had limited government, low taxes, balanced budgets (with brief exceptions) and sound money since before the First World War.
Prior to the First World War, the dominant political ideology – the centre ground – was classical liberalism, however imperfectly applied. After two world wars, the dominant ideology everywhere was a kind of managerialism or social democracy: a belief in the omnipotence of state power to improve our lives.
The period of transformation from one centre ground to another generated an immense literature as intellectual leaders worked out what on earth had created such catastrophic human suffering. If I were to recommend one book, it would be The Managerial Revolution: What is Happening in the World by reformed American Trotskyite James Burnham. He argued capitalism was dead, replaced everywhere not by socialism, but by managerialism: the rule of administrators in government and in business.
This doctrine of managerialism continues to fail: that failure is becoming increasingly difficult to cover up.
The evidence suggests that in the UK we cannot afford the state we have, not now and not in our lifetimes. Taxes are at historic highs and it is implausible to believe they can be raised usefully. Debt is heading into unsustainable territory and the National Insurance Fund will be exhausted in 20 years, putting a date on the currently inevitable default of the welfare state.
Moreover, the evidence is that currencies have been dramatically debased since 1971, manufacturing injustice on a vast scale in ways which are rarely and poorly understood, but which appear to be reflected in commonly-expressed grievances which have been leading to political radicalism.
The situation facing the UK and the world is extremely serious. When Rachel Reeves on Monday tells the Commons we cannot afford present spending, the Conservatives should make the most of it in the public interest.
Perhaps the Chancellor means to cut spending, cut taxes and go for the growth we need but it seems unlikely. More probably, Rachel Reeves is more correct than she realises: as a former Bank of England economist, she is without excuse.
This is an edited version of a longer essay which was originally published on Substack.
Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.
CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.
