“If Something Cannot Go on Forever, It Will Stop“
Working-age adults limp on through the most sustained contraction in real wages and living standards since the Napoleonic era.
Our fiscal situation is hopelessly beyond the capacity of our politics to address it. Tax and spending is so high, and so concentrated in unproductive activities such as NHS spending, that it is bearing down on growth, creating a doom loop of insufficient tax revenues to keep our debts from rising leading to increased tax rates leading to lower GDP growth leading to lower tax revenues. The only ways out are fiscal crisis, inflating away our debts or brute luck.
The writer points out that Reeves is actually trying to cut spending in areas like the Home Office and Transport, but that it doesn’t make any difference in that government will continue to occupy an ever bigger chunk of the economy. The result is a degree of schizophrenia even when it comes to building new infrastructure:
The solution, the Chancellor hopes, is over £100 billion of capital spending, to be poured into projects across the country…. policing budgets will be reigned in just as memetic, viral moral panics over law-and-order proliferate — and just as our streets return to summer volatility. Local government will be squeezed, too, with spending powers effectively frozen after 15 years of belt-tightening.
I did laugh at the reason behind the capital spending, which was described in the most cynical tones by one Dominic Cummings, former advisor to Tory PM, Boris Johnson:
The post-Brexit Leave coalition, as summarised by Dominic Cummings, was always an awkward, unsteady alliance between golf club Tories in the affluent home counties, and a new crowd of working-class, former Labour voters in more deprived, post-industrial seats. The latter would be kept on board with a simple approach: “Build shit in the North”, as Cummings told reporters.
Yeah. How’d that work out for Boris and the Tories? What chance it’ll work any better for Reeves, Starmer and Labour? I was rather astonished by this claim, backed up by a link:
Meanwhile, the excruciating winter fuel U-turn serves to maintain the long-running, cross-party consensus on boomer and pensioner welfarism, while working-age adults limp on through the most sustained contraction in real wages and living standards since the Napoleonic era.
Given that period was described by historian Simon Schama as “the most terrible slump in living memory”, due to Britain cutting the vast military spending it had poured into preparing for an invasion by the French, it’s quite frightening to think that it’s being repeated in 2025, alleviated only by state handouts that were not available in 1815.
But that’s just another example of the double bind Britain finds itself in. How long can a system last that’s both feeding, and feeding off, the private sector as it declines? That writer – who seems somewhat Left as he bemoans austerity and failing to invest when money was cheap in the 2010’s Tory era – accuses Starmer and Reeves of following the same strategy as Boris and company (“Build shit in the North“) and that it can’t work any better because the days of cheap money is over and also because of something that will sound awfully familiar to any New Zealand Labour supporter:
But neither of these prime ministers, nor their respective chancellors, has or had the political will or dexterity to deliver a whole-hearted project of renewal to an increasingly desperate electorate. Financial pressures are real. And rather than a responsive, active, agile, effective state, Britain boasts a flabby, cumbersome constellation of faceless public bodies, independent agencies, recalcitrant civil servants and an alphabet soup of committees, panels and advisory councils that frustrate the ambitions of the executive.
…
And so it goes with Starmer and Reeves: we continue into terminal relative decline, unable to live within our means, and with an inept political class unwilling to enact changes necessary to quash a coming electoral rebellion that will surely see them all wiped out.
Which chimes with this writer’s more brutal assessment:
I have followed and written on the British economy for over 30 years and believe me, while there has been a steady erosion in the edifice over the last 20 or so of those years, we are now reaching a point which is close to terminal. The foundations are built on sand.
He points out that Reeves desperate “Build shit in the North” strategy now means the State will squeeze out the private sector companies upon which it depends for tax revenue, and the squeeze is across all areas:
There are a few nations whose state spending exceeds the 45 per cent that is the UK’s figure (France, Belgium and Italy come to mind) but the UK state is some 10 points higher than OECD averages and often twice the size of Asian competitors who are catching up to the UK rather quickly. As corrosive as the scale of the state is, the degree of control even over notionally private sectors is every bit as damaging.
A twofer. That writer points out where Britain is at:
- “Reeves’s spending plans amount to the State spending a staggering £48,000 for each of the 28million households in the land.“
- “Public spending remains out of control and will continue to grow at 2.3 per cent in real terms, a rate much faster than the private sector.”
- “The unfettered private sector in the UK is now tiny, perhaps less than a third of the entire economy. It is not a coincidence that as this highly productive free market sector has shrunk, so our economy has withered and growth stagnated. Consider when was the last time any significant manufacturer listed on the London Stock Exchange over the last 20 years? I can barely think of one.“
- WRT to that private sector he lists what is fettered, and it’s vast:
- “Energy policy entirely under state control.“
- “Transport policy is hardly free. Look at the railways.“
- “The banking sector is regulated to within an inch of its life, as is the City.“
- “Agriculture is under the regulatory and tax thumb.“
Over at the Telegraph, long time business journalist, Allister Heath (from which the cartoon of Reeves comes) is even more pessimistic and blunt, It is now too late for Britain to avoid financial Armageddon, but places the blame on an obvious but still surprising target:
We hate our politicians for lying to us – of course Reeves is plotting another tax raid, of course she doesn’t have a clue how to fund a proper military – and yet demand the impossible of them, hence why even Reform are nervous about questioning the welfare state.
We are obsessed with “our rights”, and don’t want to hear about trade-offs, or personal responsibility, or deferred gratification, or that middle class welfare must end, or that “free” healthcare kills lives, or that carrots without sticks ruin a nation. Yet those who are picking up the bill for Labour’s fiscal incontinence – the top 5 per cent, business and entrepreneurs – are cracking under the strain, downing tools and heading for the exits.
Britain’s central pathology can be explained by one statistic. In 2023 (thanks, Tories), 52.6 per cent of all individuals lived in households receiving more in benefits and services than they paid in taxes… But the truly dreadful number is that 45.3 per cent of adults of working age are net recipients.…Even the 52.6 per cent statistic for net recipients underestimates the scale of the problem. It doesn’t include public sector workers, who depend entirely on taxpayers, and those who work for state-subsidised “charities”, NGOs or other bodies entirely or largely dependent on government contracts, subsidies and handouts
It has long been observed that whenever the recipients of government welfare outnumber the providers of the government revenue a nation is doomed because the former can outvote the latter. Thus while Reeves and Labour can smugly ignore the budget cuts “she never really believed in…”
….she is pushing Britain inexorably to a fiscal crisis: the deficit is out of control, the national debt is surging and gilt yields are higher than they were under Liz Truss. We are living beyond our means.
That last phrase being an oldie from the Right-WIng. But perhaps Labour would listen if the term applied instead was one of the Greenies favourites – sustainability.
I’m not quite as pessimistic about Britain’s economy as all these the writers are – but only for the very ironic reason that the inevitable destruction will provide a way out.
No Minister 