A few months ago I posted about the British politician, Daniel Hannan, praising New Zealand in his TPU speech here in 2023 (New Zealand in 2032) for having the State at only 28% of GDP, compared to Britain’s 49%. But that article was also about his writings this year about the political limitations in Britain on things like tax cuts and spending cuts.

Earlier this month I quoted some brief comments from another Tory MP, Steve Baker, about why Britain has the problems she’s got now (an ex-MP; he lost his seat in this year’s British General Election).

But now he’s gone into far more detail with an article from his own Substack account, Rachel Reeves first major misstep where he highlights a rather surprising speech from the new Labour Chancellor of the Exchequer where she has bluntly told the country that it can’t afford its current level of public spending. She’s proposed major spending cuts, presumably to balance some spending increases on things like Public Sector salaries.

Now of course she wouldn’t be a Labour Chancellor without pushing for tax increases as well – to be described in more detail later this year – and she wouldn’t be a new minister without blaming all this on the last lot in power, claiming that she’s been shocked to discover £22 billion of unfunded Tory promises, a claim that is mocked in this article which makes it clear that everybody knew this well before the election.

But Baker takes all this as an opportunity to explain to his readers the reality that Reeves is describing and facing even as she desperately tries to avoid laying out the implications:

[Tax increases are] 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.

And tax increases are not going to be the answer because, aside from their negative impacts on the private sector, they’re simply not going to raise enough money to feed the beast:

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.

The rest of his article is broken up into four segments, each with an eye-opening graph:

Spending
In just a century, by 1970, public and private spending had become roughly equal and although both have wobbled back and forth from that balance since then it remains true – even in the age of Thatcher.

Taxation
It’s at the highest level as a proportion of the economy since 1948, a level that has never been sustained even under Labour governments.

Borrowing
Every single scenario from the Office for Budget Responsibility shows debt climbing to above 250% of GDP in the next fifty years. Some scenarios – such as those with higher energy prices, which are a given under Net Zero – are above 300%. That cannot be sustained by tax increases and the The National Insurance Fund (which is forecast to hit zero itself in 2043-2044). Massive spending cust to all forms of welfare will happen under any government.

Currency

between 1750 and 1938, a period spanning nearly two centuries, prices rose by a little over three times; since then they have increased more than forty-fold.

He doesn’t mention Stein’s Law but he may as well have: “If something cannot go on forever, it will stop.”

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See also: Why taxes will rise in the future.