Will Hutton in The Guardian
Last Thursday, my wife was readmitted to hospital nearly two years after her first admission for treatment for acute lymphoblastic leukemia. She is very ill, but the nursing, always humane and in sufficient numbers two years ago, is reduced to a heroic but hard-pressed minimum. She has been left untended for hours at a stretch, reduced to tearful desperation at her neglect. The NHS, allegedly a “protected” public service, is beginning to show the signs of five years of real spending cumulatively not matching the growth of health need. Between 2010 and 2015, health spending grew at the slowest (0.7% a year) over a five-year period since the NHS’s foundation. As the Health Foundation observed last week, continuation of these trends is impossible: health spending must rise, funded if necessary by raising the standard rate of income tax.
There will be tens of thousands of patients suffering in the same way this weekend. Yet my protest on their behalf is purposeless. It will cut no ice with either the chancellor or his vicar on earth, Nick Macpherson, permanent secretary at the Treasury. Their twin drive to reduce public spending to just over 36% of GDP in the last year of this parliament is because, as Macpherson declares more fervently than any Tory politician, the budget must be in surplus and raising tax rates is impossible. Necessarily there will be collateral damage. It is obviously regrettable that there are too few nurses on a ward, too few police, too few teachers and too little of every public service. but this is necessary to serve the greater cause of debt reduction.
To reduce the stock of the public debt to below 80% of GDP and not pay a penny more in income or property tax, let alone higher taxes on pollution, sugar, petrol or alcohol, is now our collective national purpose. Everything – from the courts to local authority swimming pools – is subordinate to that aim.
Not every judgment George Osborne makes is wrong. He is right to advocate the northern powerhouse, to spend on infrastructure, to stay in the EU, radically to devolve control of public spending to city regions in return for the creation of coherent city governance and to sustain spending on aid and development. It is hard to fault raising the minimum wage or to try to spare science spending from the worst of the cuts.
But the big call he is making is entirely misconceived. There is no economic or social argument to justify these arbitrary targets for spending and debt, especially when the cost of debt service, given low interest rates and the average 14-year term of our government debt, has rarely been lower over the past 300 years.
This is not to contest the need to balance current public spending and current revenues over the economic cycle. As I wrote in my first book, The Revolution That Never Was, completed 30 years ago this month, Keynes was no deficit denier. But governments have choices about how they arrive at this outcome.
The Conservatives’ choice is driven by a refusal to see any merit in public activity: in their worldview, the point of life and the purpose of civilisation is to celebrate and protect the private individual, the private firm and private property. The state should be as small as possible. It has no role, say, in owning Channel 4 to secure public service broadcasting; it will be privatised with scant care about its ultimate owner. Equally, there was no point in holding the 40% stake in Eurostar, forecast to generate more than £700m in dividends over the next decade and a good payback for £3bn of public investment. Thus it was sold for £757m in March, the government concerned to get the sale through before the general election. You could only proclaim a £2.25bn loss on the public balance sheet and the surrender of £700m of dividends as a “fantastic deal for UK taxpayers”, as Osborne did, if you see zero value in public activity.
It is this philosophy that will drive the choices to be laid out on Wednesday. The spending of the so-called protected departments – the £189bn spent this year on the NHS, schools for five- to 16-year-olds, aid and defence – will rise in cash terms in line with inflation, but only to buy the same in 2019-20 as it does today, an unprecedented decade-long freeze in real terms. The block grants to Scotland, Wales and Northern Ireland will be hit slightly harder, protected only in cash terms, implying, after adjusting for inflation, a small real fall. The axe therefore has to fall on what is left – £77bn of spending by 15 departments along with non-school spending.
So if we take the summer budget and Office of Budget Responsibility economic forecasts as the baseline (both may change) – and there are no new tax increases – to meet his target, the chancellor has to find £22bn of cuts from this £77bn, crucial areas of our national life that have already cumulatively been cut by 30% since 2010.
As the Resolution Trust points out, seven of the smaller departments have settled for 21% cuts, which leaves the big five – Business, Communities and Local Government, Justice, the Home Office and non-schools education – to bear the brunt. This can only mean the de facto wind-up of the Department for Business as a pro-active department, further shrinkage of the criminal justice system (mitigated by prison sell-offs), local government reduced to a husk and the knell of further education. Meanwhile, the cuts in welfare will hit the wellbeing of millions, including their children. Expect on top a firesale of government assets – from housing associations to Channel 4.
Is this wanted, necessary or appropriate for these profoundly troubled times? I think it’s a first-order category error and that in 2015 the need – whether protection from terrorism or the promotion of innovation and investment – is for complex collaborative action between a properly resourced, agile public sector and a private sector in desperate need of remoralising and repurposing. There is no magic in a 36% state. But as Osborne knows, he is politically free to do what he wants. The leadership of the Labour party offers no substantive intellectual or political opposition, nor represents a potential governing coalition, nor, wedded to a bankrupt simplistic top-down statism, understands the complexities of these new times. Rarely has the principal opposition party been so irrelevant at a time of national need. All that is left is noises off – the odd newspaper editorial or column and civil society and business beginning to stir as they experience the impact. Weep for our country.
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