After 14 years in government, there will be few Tories who are not experiencing at least some degree of schadenfreude at Labour’s troubles since winning July’s general election. Such feeling will be particularly acute considering that, as Leader of the Opposition, Keir Starmer appeared to genuinely believe that the only problem with Britain was that the Conservatives were running it.
Chief Secretary to the Treasury Darren Jones wrote this weekend that Labour — unlike the Conservatives — will “leave no stone unturned in rooting out public sector waste”. One imagines the thought may have crossed Conservative minds at some point.
That schadenfreude has been dispelled, however, now that Labour has disclosed where the axe will fall. The Government is reportedly planning major cuts to disability benefits to ease market concerns about its economic plans. Personal Independence Payments (PIP) are a key focus, with Labour considering stricter eligibility rules.
There are undoubtedly problems with the rate of spending in the Department of Work and Pensions. Monthly new claims for anxiety and depression have risen from 2,200 in 2019 to 5,300 in 2023, while the Motability scheme now accounts for more than 20% of all new car sales and is widely abused.
Rising interest rates have fuelled speculation that the resulting surge in Government spending on debt interest could lead to a breach of fiscal rules. This is expected to eliminate the entire £9.9 billion of “headroom” under Rachel Reeves’s “stability rule”, which mandates that all day-to-day spending must be covered by revenues.
In the face of this, tackling fraudulent disability claims may be important, but it is largely impotent in easing market anxiety. A near quarter-century stall in productivity growth, real wages, and GDP per capita, alongside record levels of public spending and tax, are rather more pressing issues.
As the economist Andrew Lilico has noted, “‘Fraud & waste’ as deficit control measures are the last resorts of the fiscal charlatan.” Aside from disability benefit cuts, Labour’s strategy boils down to relying on a quango, the Office for Value for Money, and asking regulators for ideas to deliver growth.
This government is now on course to discover — albeit far too slowly — that the problem with Britain’s economy didn’t stem from Tories in the Treasury, but from tinkering. With Sisphyean inexorability, total public spending in real terms has gradually increased since the end of the Second World War; it is now almost twice as high as it was in the Seventies. Yet after the stalling growth, this level of spending is totally unsustainable.
The only solution to Britain’s economic problems is to deliver phenomenal amounts of growth — or to reduce both the demand and supply of government. Starmer’s managerialism is a poor answer to a challenge of this scale and, as has already been demonstrated by his backing down on Civil Service reform in the face of mild criticism, he lacks the necessary vril to deliver such a programme. Perhaps the best we can hope for is that Reeves sticks to her spending rules, and kicks the can further along until a chainsaw-wielding reformer convinces the public the status quo must be cast afuera.
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SubscribeThe engine of the UK economy is small business – from country pubs to science park companies – because they employ more than 60% of the working population. The most powerful and immediate remedy for Britain’s current malaise would be to scrap a pile of small business regulations and develop a loan guarantee system for small business investment. Labour can’t do those things because a) no-one in the current government has ever been anywhere near one of these enterprises and b) it goes entirely against the grain of the busybody culture of the Labour Party.
Our politics are now in their ‘Biden’ phase, meaning things are going to get a lot worse before they get better. We can only hope that Brits will reject Starmer and his hopeless acolytes as completely as Americans have rejected the Biden idiocracy.
As a small business owner who now lives in the US I wholeheartedly agree.
But who is going to play our version of the Donald? Certainly not the present Conservative Party, even though I do like Kemi. Nigel??
Perhaps the best we can hope for is that Reeves sticks to her spending rules, and kicks the can further along until a chainsaw-wielding reformer convinces the public the status quo must be cast afuera.
The writer is assuming that this is aviable option but the “can kicking” default policy option is no longer an option.The hard maths of zero growth,embedded public spending growth .gilt yields approaching 5% (higher on longer dated gilts) means that the fiscal position will inevitably deteriote and could do so exponentially Thats before you factor in £2.6tr. of unfundedpublic sector pensions!!!!Talk ofa £22b “black hole is pissing at the margins of the problem.
.Realistically the only solutions are huge public sector cuts(shut down every single quango,slash pensions,close down whole departments,impose zero based budgeting on all departments,time retsrict benefits,repatriate all undocumented illegals etc etc) plus a slashing of huge swathes of regulation (start with cancelling the latest employent bill) ,tax breaks for north sea oil & gas rather than windfall taxes,,start fracking on the basis of cheap gas for the next 20 yearswhilst twhilst SMR;s are developed,cancel all wind farms/solar farms etcetc
No=I cant see this happpening either!!!
Coastal and full of rivers, how much money has California sent to Ukraine before finding itself with no water? Between federal taxation and private donation, how much have its wealthiest neighbourhoods contributed to the transformation of Gaza into what the fires were now making of them? Likewise, Britain promises three billion pounds to Ukraine “for as long as it takes”, with no definition of “it”, while planning to cut exactly that much from disability benefits, with an especial focus on mental health, which the likes of Rachel Reeves and Liz Kendall are convinced is swinging the lead. Analyse that. Along with the fact that they both voted in favour of assisted suicide.
The whole point of Personal Independence Payment is that you can work while claiming it, and the most that you can possibly get is £737.20 per month. Most people are paid a third or less of that. For over a decade, I have been baffling GPs and hospital consultants with my inability to secure first Disability Living Allowance and then PIP, and that is on physical health grounds. Arthritis shows up on X-rays, so it is impossible to fake, and I am riddled with it. PIP is hard to get. Anyone who can do so needs it. Millions of people do, and that is just the ones who can jump through the hoops. Of course depression and anxiety are not life’s normal ups and downs. That is why they are diagnosable and treatable medical conditions when those are not.
Third and subsequent children, almost all pensioners, family farms, small businesses, people whom big businesses might otherwise have taken on or paid more, people who travelled to and from work by bus, the WASPI women, and now this. And yes, the fifth or so of eligible voters who voted Labour last year did vote for this. If they claim not to have known or understood, and by no means all or even most of them would say that, then they will be unable to make any such claim, to themselves or to anyone else, at the next General Election.
Just our last several decades of governments we seem to have totally forgotten ideas of individual responsibility, our duty to those around us and the need to work in order to live. The state has largely taken over these essentials. Those who are genuinely unable to work should be treated with kindness and care; most people not working do not fall into this category. Many disabled people could work, and though it might require understanding of their needs, they can and should be productive. However, if they expect state living expenses they should also expect to carry out voluntary work. They are better off than many millions worldwide. Of course those genuinely unable to do anything are a different kettle of fish. Similarly, even the poorest homeless and workless person in this country is better off than many millions worldwide. Yes, we should help them; no, we should not expect them to have a similar standard of living to those who graft for their families. When Tebbit suggested people get on their bikes he was 100% correct. Unfortunately, vast swathes of state employees have a vested interest in all forms of state control, including disability and unemployment administration; without it they would have to find jobs in the real competitive world.
Fully agree. Back to common sense.
The good thing about austerity is that it pleases the market. The problem with austerity is that historically it rarely actually works.
Western governments have sold many of their assets under the “government is the problem” and “TINA” orthodoxy already, the 80s predecessor of the chainsaw rhetoric. So how has that worked out? Well, first of all, the number of crises went from 38 between 1945-1971 to 139 between 1973 and 1997. Also the postwar period actually saw a substantially higher growth.
Second of all, none of the big players actually believe the rhetoric. They demand protectionism and subsidies. The so-called free market is actually chronically addicted to public spending but depending on the political climate and the state of the market, that spending has to be done under various pretenses with a little bit of cronyism. Fortunately there are a various options, e.g. the managerial bureaucracy, military, spending, climate or even through benefits. After all, increasing demand increases spending in the economy. Generally when governments are spending it simply increases the amount of money in the private sector, so who is borrowing from whom exactly? The main concern of big capital is that is ends up with them eventually and thus not too much with the working / middle classes and small businesses. So how does one do this? Dictating fiscal policies, undermining labor laws, outsourcing, offshoring and back at home mostly financial speculation. And when that financial bubble pops – it always does – the nanny state can bail them out and and reward them with trillions of taxpayer money, funneled through the backdoor using quantitative easing. This incidentally produces financial Ponzi’s everywhere such as the real estate market.
So now you have a private sector that is unable to produce or build anything at home and a state that is unable to provide even the most basic public services such as decent infrastructure. The very fundament on which a real economy can develop. And what does Starmer suggest? Let us do more of the thing we have been doing for the past 50 years. That will work. In fact, I read that he is under the impression that private equity can somehow help Britain. A sector that is exemplary of this whole story, notorious for its cronyism and cannibalizing what is left of the economy.
There seems to be a strange cognitive dissonance in this piece….as in ‘excessive public spending bad’ but ‘reducing fraudulent abuse of the public purse beside the point’. So let’s be clearer….. radically pruning all public spending on bogus, ill-conceived (and often fraud-infested) ‘social justice’ bungs….is a great idea pure and simple. A great idea in principle for our culture to get real and get off its Stairway to Equiheaven fairytale whether or not it rescues the economy (https://grahamcunningham.substack.com/p/stairway-to-equiheaven). There is of course zero chance that this Labour government will have the moral courage to carry it out (still less the competence) but that is another matter.
Actually, they don’t have a choice.
The Motability Scheme is indeed abused, not least by people married to a cousin, who keep popping out deformed babies, each of whom is entitled to PIP and therefore gets their own car.
On the plus side, at least the UK car industry has been able to get close to the Government-mandated level of EV sales by offloading hundreds of thousands of them onto Motability. Motability has now said their clients are not that keen on EVs and told the car manufacturers they don’t want any more.
Yes Duggie, back in 1998(!)
whilst selling new cars I found “Granny in the Attic” was the claimant (sic) yet the user was a young grandson!
(Usual suspects )
What? It’s not about whether it will boost growth or not. It’s about inevitability. The bond markets have this Government and are fully locked and loaded. They have no option except a harsh austerity.
Growth, or otherwise, doesn’t come into it.
Why? Japan has a national ‘debt’ of 263% of GDP and only moderate growth. Economists have been saying they need austerity (and migration) for 30 years or they will perish. They did not really do any of that and for some reason they are just fine.
Bond/gilt yields are increasing everywhere. They suspect this is because the market is not convinced inflation is really gone. However, it is also because central banks are slowly offloading bonds and securities from their balance sheets they purchased during the pandemic. If they want, central banks can simply reverse this and the interests on ‘debt’ will fall. With the risk of inflation. Although in the past it mostly caused inflation in assets, which is generally seen as a booming market. Oh and of course housing becomes unaffordable but nobody cares about that. Of course they will claim such decisions are made based on hard market data but the truth is that politics always plays a role.
I suspect Author and supporters of his general point would be blind to the exact same theme in the US with the kidology of the DOGE initiative. Of course there it’s inevitable that Trump 2.0 won’t be able to progress his agenda without raising the debt ceiling, or reneging on key promises. That uncertainty of course part of the coming chaos that markets are adjusting for. And for those interested look at how much Elon rowing back on his £2trillion savings election promise now he’s beginning to understand where the Govt spends it’s money. And he said ‘at least £2trillion a year’. Berk. Trump didn’t mention cuts to social security or Medicaid/Health care. And he won’t progress cuts in Defence contractor contracts in an uncertain World and especially whilst Elon sitting there covering his own contracts. Unravelling thus coming so watch, but be aware of impact on international markets esp if they still put through the extension to the Billionaires tax cuts – Trump’s priority given the payback the Billionaires expect and who he favours.
Back to UK, Labour did of course tie itself into not raising any of the 3 main taxes. Tories said the same and added they’d even cut tax with no details of how they’d balance things. Of course OBR et al said both Parties would really struggle to deliver these promises and almost certainly have to raise taxes. So it is proving. Labour might have got lucky and the international position not work against them quite the way it has, but nonetheless they took some risks and short term at least they are in a fix as a result.
The fundamentals on why UK capitalism has such poor investment record do appear to being part-tackled, but the pain is now and rewards some time away. In short term tackling the perversity of what has happened on Disability benefit is perhaps one of those where ‘necessity is the mother of invention’. The Tories designed and administered a system that increased claimants and locked them into dependency.
What else can they do? Well bite the bullet and signal moves to re-join Customs Union. Crackers for a Nation needing growth that we made trade more difficult. Possibly, at least until Trump 2.0, the only developed Nation daft enough to have done that.
How will we benefit by joining the Customs Union? Before joining the Common Market we all talked about wonders for the UK businesses. Then, afterwards, we ended up as a major contributor to poor countries AND our industries were closed down by Germany. Please don’t say “The Financial Sector” which almost closed down the world.
Could we sell energy? Only when we have hurricane-force winds coupled with hours of bright sunlight. Could we sell our brains? We probably have the fewest brains in the developed world.
We could perhaps sell our doctors and nurses after we have first brought them in and trained them. We could sell our two aircraft carriers to Macron. Hm…
Hmmmm. We’re cleverer than you think. Then again, one quick glance at the Labour Party…..
Go and talk to exporters. They’ll tell you the extra bureaucracy has added nothing but headache and cost with no upside. Full re-joining of the Single Market slightly different debate.
What a dimwit! What, you not been paying attention? Join the Customs Union! That’ll be £25 billion per year Sir plus all your fish (note: what France pays today).
Er. What will we get back for that?
Well, what you have now, more or less, but it does mean that a bunch of petty petulant fools will feel slightly better about themselves! That OK?
Bargain. Where do I sign?
Politically I don’t think it happens, although should. I suspect the TCA renegotiation ends up pretty close though.
Over £800billion in trade with EU, so worth just pondering – have we increased the administrative costs of that or not? You know the answer.
I’ve suggested before that you should stay away from economics. That you are able to write all this waffle without once mentioning the disparity in energy energy costs between UK/Europe and the USA illustrates why. Deregulation and cheap energy in the US are going to completely derail this Labour government. Why would anyone invest here or in Europe now?
There speaks the Putin supporter again. I increasingly suspect you are compromised whether because you are in the fossil fuel industry or something more malign.
As regards the ‘drill, drill’ stuff in US, let’s see what he gets through Congress and what the trade off turns out to be. Probably something for the Billionaires but much less so for the ‘little guy’.