From a practical perspective, however, “immediate” won’t happen immediately. Or even in the next four years.
That’s because the Labour Party is now in charge and doubling down on the tax-and-spend policies of Johnson and Sunak.
At the risk of understatement, this bi-partisan approach of bigger government is not working.
In a column for the U.K.-based Telegraph, Dan Hannan opined on the decline of the United Kingdom. Here are some of his depressing comments.
On current trends, our standard of living will fall behind Lithuania in five years’ time and behind the Czech Republic in six. The deadweight of taxation and debt have pushed us steadily down the league tables, from 12th place at the beginning of the century to 24th today. If nothing changes, we will fall to 46th by 2050 – a middle-income nation. Along the way, we’ll be overtaken by Romania, Georgia, Turkey and Moldova. …None of this is inevitable. It is the direct result of choices we have made – and, depressingly, that we continue to make. People respond to incentives. If you put up their taxes, so that they keep a smaller portion of what they earn, they will be less productive. Likewise, if you hand them money unrelated to what they produce, they will be less productive. …Similarly, if you have regulations that inhibit risk-taking, privilege some sectors over others, or prevent companies from acting in the most efficient way, those firms become less productive. …This year, we will spend £303bn on benefits. It is hard to convey quite how vast that sum is. It is not only bigger than last year’s defence budget; not only bigger than last year’s NHS budget; it is bigger than both combined. Yet there is no willingness to curtail this expansion. Indeed, Labour seems set to add a massive new driver to the growth of welfare by lifting the two-child benefit cap. That is why taxes are going up. …Ours was the country of Adam Smith and David Ricardo and Margaret Thatcher, the country that introduced the world to free contract, secure property and open markets. Those ideas made us the richest nation in the world. Yet our generation cares nothing for them. …We choose mediocrity.
Since I’ve written about the United Kingdom’s unfavorable growth trajectory when compared to Poland, Australia, Lithuania, and Singapore, I’m not overly surprised that Hannan is worried this his country will soon fall behind nations such as Romania and Turkey.
And he’s right that the Starmer government is crazy to punish success and reward sloth.
Sadly, things are probably going to get even worse.
Allister Heath, the Editor of the Sunday Telegraph, has a column about the government’s plan to further increase the burden of government.
The Government swore it wouldn’t put up national insurance, and then changed its mind. It promised it wouldn’t put up income tax, and now the Prime Minister is opening the door to doing exactly that, refusing to recommit to his manifesto. The Chancellor pledged she wouldn’t impose a wealth or mansion tax, and is now considering such plans. …No government in modern history has broken so many promises so quickly. The first lies came almost immediately, with the fabricated discovery of a “black hole”, the abandonment of the semi-responsible Tory spending plans and the adoption of unaffordable policies, including pay rises for its electoral base in the public sector. Reeves raised tax by £41bn a year by 2029-30 at her 2024 Budget, five times more than promised, to part-pay for a £71bn a year increase in spending. …Next month’s Budget will see another round of tax hikes, probably £30-£40bn a year… This time she will likely breach either or both of her pledges on income tax and wealth taxes. She could become the first Chancellor since Harold Wilson in 1975 to raise the basic rate of income tax. She could impose a wealth tax, perhaps in the form of a levy on expensive homes. …Her original lie was the “black hole” she caused herself by ditching Tory plans. Her latest rationalisation of higher tax is equally mendacious, and involves blaming “austerity” (at a time when tax and spend are at historic highs).
So what needs to happen? In my fantasy world, the U.K. would trade the Falkland Islands for Javier Milei and then get some much-needed spending restraint.
That won’t happen, of course, but it is worth noting that the U.K. has benefited from “austerity” a few times (1800s, 1980s, and 2010s).
Sadly, we won’t see anything like that in the next few years. Starmer and Reeves inherited fiscal profligacy and are making a bad situation worse.
