David Cameron notoriously styled himself as “the heir to Blair”. Watching a recent BBC series on the New Labour era, it struck me that, in one respect at least, our Prime Minister is more the heir to Gordon Brown than to Tony Blair.
There was plenty of personal rivalry between Blair and Brown. But there was also a difference in approach to policy. In episode three of the series, Douglas Alexander states:
“Tony believed that choice and reform within our public services was a route to excellence.”
Lord Mandelson then added that Brown thought that Blair’s reform agenda was “floundering around.” Brown felt schools just needed more books, teachers, more equipment. The NHS just needed more hospitals, more doctors, more nurses, more operating theatres.
Brwon’s approach was ineffective as well as expensive – especially with the Enron accounting dodge of the Private Finance Initiative used to pay for much of it. Council tenants would have new PVC windows – even if they might have preferred to keep the old glass sash ones. Building Schools for the Future would provide gleaming new buildings that would win awards – even if they weren’t much use for teaching children in.
Boris Johnson is on the same path. Chanting about 40 new hospitals. 50,000 more nurses and so forth. All very Soviet five year plan. For Brown and Johnson, if the state is failing the answer is obvious…a bigger state! Margaret Thatcher, Tony Blair and David Cameron all presided over increases in public spending in real terms – that is over and above inflation. But they would also, at least, consider if the problems might be more fundamental – something wrong with the system.
In any case, the Big Staters risk running out of road. So complete has been their triumph that it is doubtful how much further it is viable to go. Tax is already pretty high and set to rise sharply. At what point does the burden become so high that economic growth is squashed to the extent that tax revenues start to fall? The National Debt is already at a frightening level.
Rishi Sunak is a technocrat rather than an ideologue. He likes to check the data, crunch the numbers. So he may judge that even if the sole purpose in life is to have the maximum possible public spending, we are already at, or nearly at, or even beyond the point, at which pushing up tax and borrowing is able to achieve that. Some economists put public spending at 45 per cent of GDP as the upper limit – we are at 46.5 per cent.
Thus we have a clash with Johnson – who is always brimming with bright ideas for spending our money. Some of these may actually be relatively modest. The Conservative Party Conference saw an announcement that £22 million would be spent on repairing public tennis courts. Public spending this year is due to be £1,053.3 billion. That’s nearly £3 billion a day. £120 million an hour. A new Royal Yacht costing £200 million would come out at a bit more than an hour and a half’s public spending.
There are two ways of looking at that. The Prime Minister might feel he should be able to press ahead with a few of these innovative, high profile wheezes, to have a bit of fun. He might puzzle as to why there was such a lot of fuss over his proposal, when Mayor of London, for a Garden Bridge – with a claim on public funds of £60 million.
The Chancellor might respond that it is precisely because spending has got so high with so much more already scheduled – HS2, net zero and so forth – that rigorous discipline must now be applied and any new claims resisted. That the public finances, though in a less dire state than forecast, are still on the brink – highly vulnerable to an increase in interest rates.
So we are facing a rather sullen impasse in the coming years. A crash is averted. But economic growth is held back by heavy taxation. We shuffle along in the slow lane making a modest but unexciting recovery. We have been told to expect a dull Budget on Wednesday and can look forward to more dull Budgets to come.
Where does that leave the Johnson legacy? He might well win another General Election or two. It is true that having the state at its maximum viable size leaves Labour in a bit of a fix. They can only call for the state to be even bigger and will struggle to make such a demand feel credible.
But if there is no spare cash for his pet projects, what monuments will Johnson be able to point to? PMs do sometimes ponder the matter. Those that achieve true greatness – such as Churchill or Thatcher – don’t need to worry too much about it. I suppose the Channel Tunnel is a Thatcher legacy but it seems almost trivial alongside everything else she did.
Harold Wilson would mutter about the Open University between puffs on his pipe. Ted Heath took us into the European Economic Community. (How’s that working out?) John Major’s Citizen’s Charter proved a damp squib but the National Lottery is going strong. Michael Heseltine was really responsible for the Dome – but somehow Blair got blamed for it. The vacuousness of the project just so neatly encapsulated New Labour.
Theresa May didn’t have much of a legacy – due to Philip Hammond, her misery guts Eeyore of a Chancellor. Struggling to identify something in her resignation speech on the steps of Downing Street she mentioned the Race Disparity Audit. Then burst into tears.
How can a repetition be averted? A deal should be made. The PM can have his fun. A few billion a year will be found for some eye-catching intiatiatives. Even with the hit and miss nature of things there should be the odd triumph and thus a decent legacy. But in return there must be agreement for far more substantial spending cuts elsewhere.
Spending on Quangos is £272 billion. Government Departments could be required to cut this spending by 20 per cent. Sometimes Quangos could be abolished as their work is unnecessary – for instance duplicating the work of others, or enforcing regulations that could be scrapped. Sometimes the Quango could be abolished but some of its work continued by Government Departments. Sometimes the Quango could be retained but its budget cut. Sir John Redwood could be given a sort of backstop role. Any Government Department that couldn’t manage to reach its target would find he would be brought it to do it for them.
Welfare reforms could include changing the rules so those living with their parents are only eligible for Universal Credit after the age of 21 – rather than 18 at present. The Benefits Cap (£20,000 a year outside London, £23,000 a year inside London) could be tightened. Child Benefit could be limited for new claimants to the first two children – as is the case with Child Tax Credit.
Francis Maude could return to shrink the civil service back down to size. Throughout the public sector, the setting of national pay rates could be lifted. Not only should regional variations be allowed but responsibility for setting pay devolved to each school, NHS trust and local authority.
A huge public spending item is debt interest. Here exponentially increasing the sale of surplus public sector land could be a great help. The value would be in securing planning permission for housing development before it is sold. Far more could be achieved than is being done at present – Oliver Letwin has written amusingly about the absurd excuses given. Instead of one or two billion a year it should be cranked up to £20 billion, £50 billion, a £100 billion. Not just providing the space for 10,000 or 20,000 homes a year but several hundred thousand. Of course, development is controversial but state land sales would give some advantages here. It could ensure the proposed design is beautiful and traditional. It could skew it towards the Government stated preference of brownfield sites in the north.
This could also allow the supply of social housing to increase – with developers allocating a proportion of new homes for this as part of the negotiations. The higher the proportion of social housing, the lower the price the Government could expect to get for the land sale. But this arrangement would allow a further saving. At present Homes England spends £6 billion of taxpayer’s money a year subsidising new social housing – last year “enabling 35,000 new homes to be built.” That seems very poor value for money. That spending could be scrapped while the number of new social homes substantially increased.
Relationships are often strained due to squabbles over money. No doubt the Prime Minister and the Chancellor of the Exchequer will have their own ideas as to where the axe could fall. That’s fine – just so long as they take a bold approach in finding savings. Then they can share the proceeds between funding new programmes that are a personal priority for the Prime Minister, while also allowing the Chancellor to restore stability to the public finances and set the economy on course for lower taxes and higher growth with a Lawsonian flourish.