Who will answer the call to become Britain’s Javier Milei? The Argentine president who single‑handedly tamed monthly inflation from 25.5% when he took office to just 2.2% at the start of this year. The man who the World Bank now predicts will oversee a remarkable 5.5% GDP expansion in 2025. Who has axed Argentina’s fiscal deficit for the first time in 123 years.
Across the right of politics the radical Argentinian market liberal has won plaudits:
- Nigel Farage said last year he had ‘huge praise for Javier Milei’, calling Milei’s economic reforms ‘Thatcherism on steroids – this is incredible, cutting and slashing public expenditure, doing all the things he’s done… That’s leadership… He is amazing’.
- Boris Johnson exalted the ‘chainsaw-wielding, bushy-sideburned wild man of Hayekian free-market thinking’. He hailed Milei for giving Argentina ‘the economic medicine it needs’ through drastic spending cuts.
- Richard Tice lavished praise on the Argentine President after his appearance at the World Economic Forum, saying ‘Javier Milei rightly tells the elite [at the] awful WEF the facts of life – socialism and state intervention tends to make people poorer’.
- Kemi Badenoch told the International Democracy Union that Javier Milei ‘is absolutely right’ after quoting the Argentine president at length, saying ‘with tools such as printing money, debt, subsidies, controlling the interest rate, price controls, and regulations to correct market failures, the state can control the lives and fates of millions of individuals’.
Clearly these politicians like what they see when it comes to Milei. They even draw analogies between two once immensely rich countries, now dragged to their knees by terrible policy choices from successive governments. Dragged to decline by an unwillingness of those in power to slay the twin dragons of high spending and stifling regulation.
These politicians no doubt believe they can match the Milei miracle. But how has the firebrand Argentinian actually achieved his credit rating agency upgrades, booming inward investment, collapsing inflation, and rocket boosted confidence?
Spending cuts.
And where have those cuts fallen? The single largest area of spending to fall victim to the chainsaw of deliverance?
Pensions.
According to the Argentine Institute of Fiscal Analysis, the largest proportions of the cuts fell like this:
- Pensions: 35% of total cuts.
- Direct Real Investment: 15% of total cuts.
- Transfers to provinces: 13% of total cuts.
- Energy subsidies: 9% of total cuts.
- Public sector salaries: 7% of total cuts.
That’s right, by far and away the deepest cuts made in Argentina were to the state pension. No other spending programme makes up a larger proportion of Milei’s savings.
Perceptive readers might be able to guess where this is all going. Yesterday, the Milei praising Nigel Farage took to the stage and announced a Reform Party government would spend more taxpayers money on pensions.
Farage announced that he would restore in full the Winter Holiday Fuel Allowance to all pensioners – no matter their income or wealth – after the Labour Party limited the annual benefit to those in receipt of less than £11,800 per year. He also promised to cancel the Conservative Party’s limit for families claiming benefits (child tax credit) for more than two children.
Nigel’s big spending policy blitz is making waves across the opposition benches. While lifting the two child benefit cap is a bridge too far for Kemi Badenoch, she has made opposition to winter fuel allowance cuts a mainstay of her leadership, with the Conservative Party calling Rachel Reeves’ decision to means test the universal benefit ‘depriving millions of pensioners vital support’, ‘cruel cuts’, and even launched the website keepwinterfuel.com.
It’s clear that neither Reform, nor the Conservative Party want to have a serious conversation about the ballooning pension bill. While Reform’s inching towards pronatalism is welcome news, it’s unclear whether more benefits spending will really fix Britain’s dwindling birth rate – and crucially the dependency ratio. Something I wrote about back in 2022.
And it’s almost not worth mentioning that Sir Ed Davey, fresh from fighting the 2024 election promising to spend more than any major party, has committed to restoring the winter fuel allowance in full to all pensioners – just like Reform.
Listening to all of these leaders you wouldn’t think that pension spending is projected to balloon by another £30 billion in the next four years alone.
Our entire pension system is in crisis. The dependency ratio – the number of working age taxpayers there are for every pension age retiree – has been steadily worsening. In the 1980s there were four people of working age for every pensioner. Today it’s three working age people to each pensioner. And even with sky high migration, we’re on course for two working age people per pensioner in the not too distant future.
Thanks to the Ponzi scheme that is our terribly designed state pension, there is no pot that has been paid in to. Every pension is paid out of current taxation. The Resolution Foundation recently found that on average, far from withdrawing from their own savings pot as many believe, baby boomers withdraw around 130% of what they put into the system.
Of course most boomers paid into the system all their lives, but demographics today mean that on average they are withdrawing 30% more than they put in.
The spending trap is going to continue for years to come on current trends, and while attempts to raise the birth rate are admirable, more tax credits seem like a wish and a prayer in the face of global evidence. Every developed country is hurtling towards a baby bust.
A strange case of amnesia appears to develop in politicians who have previously said sensible things about pension spending. By the time they reach high office, their previous thoughts are mysteriously forgotten.
Despite Shadow Chancellor Mel Stride’s one time assertion that the pensions triple lock is unsustainable, and despite Kemi Badenoch’s three year old suggestion the universal winter fuel allowance should be scrapped, the Conservative Party under their watch takes every chance it can get to remind the country how it sent pension spending on a triple locked ratchet. Three annual metrics to increase spending, guaranteed to outstrip the economic growth necessary to pay for it all.
Politicians who boast of their spending bonanzas cannot take on the mantle of Milei. Could it be that the only senior politician who carried through an understanding of this ticking time bomb from opposition through to government was… Rachel Reeves?
Let’s ignore for a second her first budget’s £25.7bn extra spending on the NHS (just a tad more than the £2bn extra promised in the Labour Party manifesto). Let’s ignore how this extra spending was obviously planned from the off and avoiding announcing it before the election was done in an attempt to avoid questions over the inevitable tax rises to fund it. Let’s ignore how the budget that claimed a £22bn black hole in reality spent an extra £22.6bn on the NHS, raised £25bn in tax rises, and committed to a further £40bn extra borrowing…
On tackling the gerontocracy, Reeves appeared to be willing to go where no one was willing to go before. In office the Conservatives pursued half-austerity, cuts to working age benefits while spending billions more on universal benefits to older people. Could Reeves have turned that formula on its head.
In short, no. The backlash came hard and it came fast.
In January this year pollsters More In Common found the three most damaging ‘scandals’ to the Government to be:
- Taking winter fuel payments away from pensioners
- Changing inheritance tax on farms
- The decision not to compensate WASPI women
Two of these were of course eminently sensible decisions of fiscal conservatism. Cack handedly announced, perhaps – but sensible nonetheless. Just one of those top three scandals that registered with the public was an unexpected tax grab.
And so Rachel Reeves found herself fighting a losing battle within the Cabinet. As all other parties repeatedly hit the Labour Party over this early decision, as the polls showed taking away middle class pensioners’ holiday money was more unpopular than partygate, as the local elections delivered a drubbing for the Labour Party – government by focus group won out over what would appear to be the most obvious, rational, and justifiable savings.
Reeves fought her corner for months, but ultimately has lost the internal battle. When Keir Starmer announced last week’s winter fuel U-turn, his Chancellor was curiously not by his side. Instead, the Prime Minister was flanked by his Deputy, Angela Rayner – alongside Home Secretary Yvette Cooper. The Chancellor is now on the back foot, unable to stand by a policy the entire Treasury so clearly believes in.
Britain is now ditching even the mildest hints of government by chainsaw, in favour of the Peronism that took Argentina out of the rich country league in the first place. Today, no party leader is willing to take on the mantle of Milei.
It begs the question how bad will things have to get in Britain before more radical reform to the welfare state appears palatable, or necessary?
Enter DOGE. It’s not just Argentina that commentators and politicians on the right have repeatedly praised, but the curious American outfit that is the Department of Government Efficiency. Could the Reform Party keep expanding pension spending but bring down government expenditure overall by ruthlessly targeting ‘woke waste’?
Here it’s worth being unambiguous. No. One of these models works, and the other does not. Of these two models of spending reductions leaders most often cite: one is real, and the other is little more than a deckchair rearrangement operation.
Far from taking a chainsaw to the cost of government, DOGE has barely scratched the surface. Elon Musk’s team has reportedly saved just $160bn out of a federal deficit that last year topped $1.8 trillion. The mass layoffs of federal workers, cuts to USAID, and cancellation of DEI programmes has in the best case scenario saved just 2.4% of US federal expenditure.
Elon Musk himself announced he would be stepping back from DOGE after several high profile run ins with Cabinet secretaries over deeper cuts. Musk knows, like Milei, that entitlements is the genuine arena for significant savings to be made, but his team appears to have hit the political buffers. Musk has now shifted tack to explicitly say ‘the profligacy of government means that only radical improvements in productivity can save our country’.
.
Perhaps he will be right. Perhaps the intelligence explosion will take off by 2027 and rates of growth previously unimaginable for an advanced economy will blow this conversation out of the water. But that’s a wing and a prayer – and far, far removed from the original intent of the Trump administration’s drive for government efficiency.
If Farage follows the DOGE, rather than the Milei model he will be sorely disappointed. Reducing foreign aid, DEI officers, or the number ergonomic chairs for county councillors will not touch the sides of the thorny and ballooning DWP bill. Just as in the United States, populist cuts are merely window dressing compared to the trickier, thornier issues of benefits and pensions. Politicians engaging in wishful thinking should recognise that cutting back on trivialities doth not a dent in spending make.
The blunt fact is that Britain doesn’t have a Milei. No one in British politics is brave enough to take that stance. Those that even dip their toe in that direction are quickly cut back down to size.
On current trends this country is drifting to a dark place. A bloated state, high tax burden, and the slow, managed decline that has not jolted the public into a genuine sense of crisis. It took Argentina seven decades and nine sovereign debt defaults to wake up to their spending crisis.
We can only hope it won’t take Britain quite so long.
This piece was originally published on Tom Harwood’s Substack.
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