Britain is a rich country with the world’s 6th largest economy and the highest tax income for decades, which raises a simple question – why do we seem so broke? Tom Calver, Data Editor at The Times, tackled the question last week. The big picture is pretty simple: we have a huge debt burden sucking over £100bn out of the budget every year (more than the entire education budget and nearly double the defence budget); and that would be okay-ish if the economy were growing, but it’s not.
That creates what Calver calls, in the kind of obscure jargon popular among data nerds, “a uniquely shit set of circumstances for the government.” It also raises the next question: why aren’t we growing? The answer broadly comes down to two things.
First, we have the lowest rate of investment (public and private) in the G7, with some trailing off since Brexit. There are many compelling examples of this, but a fun one was presented in a thread by Michael Dnes this week: it turns out that over two thirds of the growth in Britain’s motorway network since 2012 has come not from actually building new roads, but because the Ordnance Survey are more accurate at measuring them.
Second, the public sector is getting less and less value for money. In statistical terms, “productivity is about 9 per cent lower than it was in 2019,” but we can see that viscerally in e.g. the state of the NHS, a near-£200bn black hole into which tens of billions of additional spending has been poured with sluggish improvement to show for it. I’m in favour of increased defence spending, but even I have to admit that procurement right now is a disaster, and that without serious reform the extra cash could be spaffed up the wall on things like the helicopter debacle recounted by James Holland:
The purchasing of new helicopters two-and-a-half years ago, for example, was halted at the last moment because the MOD suddenly decided some competition was needed. It wasn’t. Two – foreign – firms who subsequently tendered for the contract then pulled out at the last minute, wasting valuable time, money and effort, and presumably had entered the bid in the first place only to undermine that of the original British firm. The RAF still doesn’t have any of these new helicopters.
What the government gets for the money it spends has been in decline for some time, and is often shockingly poor compared to other nations. HS2 is an order of magnitude more expensive than high speed rail projects run by comparable European powers. The new nuclear power station at Hinckley Point C is coming in at four times the cost of comparable projects elsewhere. These two projects alone represent an overspend of perhaps £60-70bn versus our competitors, which is the equivalent of cutting a penny from the base rate of income tax… for over a decade. Obviously that’s a gross simplification – Hinckley Point C is in part privately financed – but it gives you some idea of the sheer scale of waste.
One reason for this is that parts of the British state are fundamentally misaligned with goals like ‘improving living standards’ or ‘increasing wealth’, whether that’s through hand-wringingly incompetent procurement processes, long-term failure to invest in the infrastructure and management required to support ‘moar frontline staff!!’, acute treasury brain, or endless cohorts of committees and quangos.
Speaking at a rail conference last year, HS2 Chair Sir Jon Thompson said: “To build a railway between Euston and Curzon Street in Birmingham, I need 8,276 consents from other public bodies, planning, transport, the Environment Agency or Natural England. They don’t care whether parliament did or didn’t approve building a railway.”
Imagine for a moment the sheer human effort, the cost, the entire lives consumed by the gigantic national project of ticking each of those 8,276 checkboxes. It is absolutely correct that we have additional checks and balances, but this is an organically-grown system operating with no overall oversight or coherent strategy, spawning busy-work for thousands of people, much of it duplicated, unnecessary or redundant, much of it – like the infamous bat tunnel – having little provable benefit for things like environmental protection in the first place.
Indeed, improving things like the environment is not the de facto goal of this system, it is not what it was ‘designed’ or incentivised to accomplish. If it were, much of the money would be far better spent. I cannot stress this enough: this is not a battle between, say, infrastructure and the environment. It’s a battle between people who think we can do both, better; and people who seriously believe that a bat tunnel is the best way to spend £120m to support wildlife, a proposition for which no compelling evidence has ever been provided.
Meanwhile, local government veers towards bankruptcy, in large part because they’re mandated to write blank cheques for social care with no support or strategy from central government. Individual cases in Central Bedfordshire are now costing up to £750,000 per year, a quarter of the entire libraries and leisure budget and an amount that is rising rapidly with no apparent ceiling. As I wrote previously, “In a single year, residential care costs for children have increased by £2,000 per child… per week,” taking the average cost for a single case from ~£200,000 to ~£300,000 per child per year, again with little explanation as to where the money is going or how this is even possible.
Similarly, “school transport costs have increased by over 100% – from £9m to £20m – in just 4 years” – that’s driven by an unexplained rise in the number of SEND pupils eligible for support and it amounts to roughly the same as – deep breath – the transport, roads, parking, libraries, leisure, housing benefit, public protection and safety budgets combined. Central Bedfordshire Council is not an outlier here – collectively, council overspends on SEND services are set to hit £2bn in the next year, risking further bankruptcies. Again this is not about pitting children against libraries, but asking if we seriously believe we’re addressing either of these things well?
There’s a growing tendency for political commentators to talk about the need to raise taxes this year to fix failing public services, and I get it, I really do. Many of these entrenched problems require up-front capital investment to fix or reform broken systems. But they’re overlooking a major issue: to many voters this will sound bonkers given the endemic problems above; and no amount of ‘but actually other countries have a higher tax burden’ or ‘taxes are still lower than they were in the 70s’ is going to persuade them otherwise.
That’s before we consider an inconvenient truth about those nations with higher tax burdens – they fall more heavily on middle earners, because (‘eat the rich’ fantasies aside) you simply can’t get that much money without a broad base of people and businesses to provide it. Per the Institute for Fiscal Studies (my italics):
If the UK were to adopt the income tax and [national insurance] rates of one of its higher-tax European neighbours, it would, in most cases and unsurprisingly, have higher tax rates and raise more revenue from both middle and high earners. But the difference in the tax levied would be larger for the median worker than for one near the top of the distribution. This is because average tax rates rise more quickly with income in the UK, and are already higher at the top relative to the median, than in most of the European countries that raise more revenue overall.
Advocates of tax rises point out that actually, middle income families face lower taxes than in many other developed nations, and that’s absolute true, but it overlooks a glaring problem: housing costs. Britain’s houses are cramped, ancient and in the wrong places leaving workers with longer, more expensive commutes. And we get to pay more for the privilege, almost single-handedly reversing the relative wealth of many British families versus their European counterparts. It’s a cliché that every other policy problem in Britain resolves to a housing problem, but in this case punishing rents and mortgage payments are consuming a large percentage of the income that other countries would tax.
Asking this of middle income voters at a time when trust in all political parties is at historic lows and standards of living are being eroded is a recipe for outright militancy.
If anything is done on taxes, it has to be coupled with serious, once-in-a-generation reforms that stop the state from simply bleeding out the extra cash, and visibly improve the fabric of people’s lives. That means things like a total rethink of local government funding, a massive expansion of house building, ripping up procurement processes, far more radical reforms of planning, and an integrated strategy for social care.
Labour need to put forward an epoch-defining deal for the public to sign up to, not just incremental tweaks and budgetary fixes in response to whatever the OBR says this week. The current level of ambition, of vision, just doesn’t match up to the situation we’re in.
In short, it’s time for Starmer and Reeves to go big or go home. If they don’t they lose anyway, so go out in style. To quote Jack London: “I shall not waste my days in trying to prolong them. I shall use my time.”
Another plug for my new podcast with
. This week: the Lower Thames Crossing, affordable housing, and an interview with Joe Hill, policy director at the Reform think-tank, on “Everythingism”. Also I go on an unsolicited rant about Maidenhead NIMBYs.
Ben Ansell has a fascinating essay on what he calls ‘chaos chasers’. In a nutshell, “people whose lives are easy and vote for disruptive populism on the assumption it won’t change anything about their lives. These people believe in FADFO – Fuck Around, Don’t Find Out.”
Ben’s post largely looked at voters in the context of populism, but I think this applies neatly to other areas so I left a comment, which I’ve reproduced (lightly edited) below:
This is fascinating and I think it applies strongly in the activist space as well. The term I’ve always used for it is ‘escalators’ – people or organisations who, given a crisis, will always try to increase the complexity or drama involved instead of breaking it down and working towards a solution. So with e.g. climate activism, you can see this in protest groups who wrap the whole thing up with ending capitalism, solving Gaza, minority rights and god knows what else, until there’s a massive intractable knot of stuff that precludes any notion of actually fixing it.
It’s almost like they *want* a gigantic omnicrisis because that’s more exciting than just boring old climate change. So they go and scream at people on the M25 and it feels like that’s… sort of the point, to go out and do chaotic, shouty, cathartic stuff without any risk that you might have to actually take responsibility for a real problem or fix it.
And inevitably the kinds of activists doing this are often time-rich, privileged types who are relatively insulated from the consequences, which is why I think the Just Stop Oil jail sentences were quite triggering for some of these groups – they were shocked that doing something illegal and disruptive might actually result in serious consequences. There’s a sense of “yes but surely prison isn’t for real people like me?”
Not all activists, obviously, but a certain percentage do just seem to want the world to burn, and in my experience it’s usually the ones who are most comfortable in it.
Chris Spargo relaunched his YouTube channel this year with an epic series of videos on… I guess the best description I can come up with is ‘the fabric of British society’. He combines the production values of early Tom Scott (which is a complement, it’s still very personal and not overproduced) with a curiosity about the sorts of topics that quietly permeate our environment but rarely get discussed.
Why do so many supermarkets have clock towers? Why do we think cheese & onion crisp packets should be green? And in the latest video, why is a mysterious symbol carved into thousands of walls and buildings across the UK? It’s addictive stuff.
Behind the Bastards has been one of my favourite podcasts for several years, and they have an absolute banger of a 4-part series on the Zizians, a cult-like offshoot of the Rationalist movement linked to a string of deaths in the United States. What makes the series particularly good is that it properly identifies the Rationalist traits that made it such a fertile breeding ground for this kind of group in the first place.
A few points stuck out to me. One is how so much of the discussion around AI and the singularity was monopolised by fringe characters with little experience of developing the technology or using it in real, practical environments, distorting public perceptions of the field.
Another is on the dangers of overthinking. A major problem smart people seem to have, which you see a lot in e.g. conspiracy theorists – is an inability to turn their brains off after a certain point. The real world is messy, and behind any truth you’ll find a web of open questions and contradictions. Think too hard, or too obsessively, and you’ll wind up on a doomed attempt to resolve all of them, plummeting down the rabbit hole until you land in a parody of thought.
The consequences can be highly disturbing, as Robert explores. It’s well worth a listen on whatever Podcast app you use, or on YouTube below.
That’s all for this week, another essay coming Tuesday week (I’m on holiday next week). Until then, please don’t join any cults (except for our podcast obviously).
