‘Austerity’ has been, according to many, the main government policy for the last seven years. We are told that the Tories have eviscerated public spending. This is of course a myth which must be dispelled.
Anecdotes about a chronic lack of funding for everything from social care to lollipop ladies feed into a narrative that our government is intent on scaling back the state. A recent article even accused the Conservative government of “economic murder” by failing to adequately fund health and social care. To read the mass media is to believe that Theresa May bathes in the blood of newborns and regularly tests chemical nerve agents in Poundland.
However, this accusation of austerity is a myth. The campaign to divide British society along lines of red and blue only detracts from the real issue, namely the unsustainable nature of public spending in the United Kingdom. Calculating UK public spending is like attempting to keep track of Philip Green’s finances: both are mired in complications, obscure amalgamations and downright distortions. However, certain trends are immediately obvious and quite worrying. An ageing population is putting greater pressure both on social protection (pensions, benefits and personal social services) and healthcare. Between 1994/95 and 2014/5, social protection and healthcare have massively increased as a percentage of the budget. * Healthcare has risen from 13.9% of spending in 94/95 to 19.8% in 14/15. Social protection has risen from 35.9% to 38.1% in the same period. Despite four years of Conservative government, spending on social protection and healthcare was 8.1% more of the budget than it was twenty years before (it will probably be higher in the year 2017/18). The percentage of the budget spent on education, general public services, defence, public order and safety, and other areas has decreased to allow this. If one is to accuse the Conservatives and New Labour of anything, it would be of pillaging the Ministry of Defence. The MoD’s share of the budget has fallen by 2.8% over twenty years. Although this might seem small, this has left the MoD largely impotent in dealing with the diverse threats facing us today. Those arguing that public spending on healthcare and social protections has been slashed are guilty of feats of impressive mental gymnastics.
The Tories have not ‘gutted’ our National Health Service. NHS executives know that they can exploit public hysteria over its future to manipulate governments into granting them the funding they desire. The only issue is, the NHS would rather like a budget exceeding 100% of GDP. It is doubtful that since its creation the NHS has ever complained of having too much money. Since no amount of money will ever satisfy its grand ambitions, the NHS simply cannot be allowed to determine how much money it receives. Spending on the NHS rises year-on-year; between 2014 and 2015, healthcare expenditure rose 3.6%. For an international comparison, the UK’s healthcare spending (9.9% of GDP) is above the median for OECD countries. Increasing the NHS’s budget without any new source of revenue would achieve little aside from worsening pressures on other public services. Make no mistake, improving the NHS must not be achieved at the expense of the education budget. To restore balance to government spending, increases in allocations to defence, education, and general spending are necessary. If the NHS demands similar increases, it must be reminded that for twenty years it has been the spoilt child of government spending. No longer must the NHS be able to use fear to extort ever larger sums from the public purse.
With state pensions, the situation is even worse. Under the current regime, roughly 16% of the total UK budget is spent on them. This translates to 5.5% of total GDP, and is predicted to rise to 7% of GDP by 2054/55. The £108 billion required per year to prop up state pensions could not be covered by Jeff Bezos (the richest person alive), who is worth an estimated £75 billion. For a better comparison of just how much money is required for state pensions, PwC estimated that UK public spending on infrastructure was £72 billion in 2014. More is spent on assuring a universal basic income for over-65s than is spent on roads, railways and runways. Our ageing population means that this trend will continue for the next few decades. Becoming unsustainable is merely a question of when, not if. Public pensions are a relatively new idea, and statistics have shown them to be an increasingly untenable one. Growth forecasts continue to be gloomy as the burgeoning costs of social protection and a slowing economy leave us, like Japan, helplessly awaiting the coming storm.
Japan serves as an example of this outcome. The island nation’s dance with deflation since the 1990s is largely due to its rapidly ageing population. Healthcare spending alone accounted for 11.2% of GDP in 2015 (again, the UK’s was 9.9%). This is despite us having a younger population which is not ageing at the same rate. According to the OECD, 25% of Japan’s population in 2013 was over 65. In the UK it was only 17.1%. If the UK continues its current regime of higher and higher spending on healthcare and social protections, it risks sacrificing the futures of the youth for the needs of the old. Despite being less than a fifth of the population, over-65s consume two-fifths of the NHS’ budget. Though far from surprising, this cannot be sustainable.
Despite an ostensibly progressive tax system, there is no way we can continue to support the welfare state as it currently exists. With little scope for new taxation the UK’s problem is that we spend too much on public services, not too little. Until we realise that the real debate is over how much less we should spend on social protections, rather than how much more, we will continue to edge toward the crashing demise of the very institutions we are trying to save.