“Both parties have abandoned fiscal restraint”
“Both parties have “abandoned fiscal restraint” in favour of more borrowing”
By Prof. Syed Kamall, courtesy of IEA
Today’s election speeches show both parties have abandoned fiscal restraint in favour of increases in public spending to be paid for through extra borrowing.
The Labour Shadow Chancellor has pledged to more than double government borrowing from £25 billion a year to a staggering £55 billion, proposing massive increases in spending and state intervention in the economy.
John McDonnell has promised an overhaul of infrastructure but, as we know from the massively over-budget HS2 project, grand government projects are notoriously inefficient.
Furthermore, promising billions of additional spending on the NHS without also thinking about the best structures and systems to deliver better patient care and choice will do nothing to fix the long-term problems facing the health service.If spending doesn’t go hand-in-hand with reforms, the NHS will continue to lag behind other EU countries in terms of healthcare outcomes.
Conservative Chancellor Sajid Javid has also chosen to revise his fiscal rules in favour of hikes to public spending funded through more borrowing. While it is positive that the Chancellor stressed the importance of keeping debt in check, turning on the spending taps risks undermining the work of recent years to get the budget deficit under control, after years of over-spending.
By spending the majority of the Government’s fiscal headroom, both parties risk glossing over the fact that the tax burden is at its highest for almost 50 years. If the state’s finances are as improved as the Chancellor says they are, tax cuts, especially for the least well off, should also be prioritised.
In order to make the most of the opportunities that lie ahead, politicians should be focusing on allowing taxpayers to keep more of their wages, enabling more consumer choice and reducing inefficiencies in order to save money and improve services, instead of bribing tax payers with their own money in a bid to win votes.
Professor Syed Kamall is Academic and Research Director at the IEA and Professor of International Relations and Politics at St Mary’s University, Twickenham.