“I think the tax burden was too high under the Conservatives. That doesn’t mean that we have to cut public services. It means that we have to look at how we are delivering public services…”
That was Kemi Badenoch on Kuenssberg yesterday morning, having her first confrontation as leader with the black hole consuming British politics: that this country increasingly cannot afford things, but will not admit it.
It is true, as she said just afterwards, that “a lot of what government does is not even public services”. The bad news is, the great bulk of that is entitlements – welfare, pensions, and so on.
So the answer to her question (“how do we fix that?”) would probably start with “stop paying the Winter Fuel Allowance to wealthy pensioners”. But she wants to restore it. That bodes ill for subsequent obvious steps such as scrapping the Pensions Triple Lock (to which, at least, she has not committed).
This is not a Badenoch problem. Robert Jenrick, for all his more detailed proposals on things like immigration, was much hazier on the economy (and also backed the WFA). Jeremy Hunt, when chancellor, was wont to appeal to “the long run”, a perpetually-receding point somewhere in the future when we’d start facing the hard choices.
So it’s a Tory problem. Or perhaps the Tory problem. Or indeed just the problem of British politics, period.
Regardless, it’s just a fact that there is no way towards a meaningfully smaller state, or to substantially and sustainably lower taxes, without cutting services and entitlements. They’re most of what the state does, and a smaller state would need to do less – at least if it is to keep doing anything well.
We tried the alternatives. David Cameron and George Osborne tried to do austerity whilst avoiding hard decisions by salami-slicing the whole thing without making any fundamental changes to the footprint of government; the result was what John Oxley has dubbed ‘Sh*t-State Toryism’:
“There are few things that the state identifiably stopped doing under Cameron and Osborne, but lots of things it did less and less well.”
Then, Liz Truss attempted to simply deficit-finance £40bn of tax cuts. The market wouldn’t wear it, at which point she was doomed (although it would have been an education to see her try and get the hurriedly-promised £40bn of spending cuts through the Commons).
By the end, Rishi Sunak was just carving some exceptions into vast stealth taxes and calling those exemptions tax cuts. Remember Labour’s ‘retirement tax’? That was just fiscal drag, which which he was hitting everyone else. For whatever reason, this did not pay the political dividends of the actual tax-cutting budgets of yore.
On top of the above there have been endless reviews and hunts for efficiencies. Perhaps there are still some to be found. But the orchard has been picked through so many times that the odds of finding low-hanging fruit are small. Asking departments to make cuts, especially if you protect their big-ticket items, means trawling a bramble-thicket which are either practically or politically difficult to stop doing – and having to endure lots of stories about nasty ministers cutting this or that nice little thing.
(There are of course substantial gains to be made by reforming and cutting regulation but the ones that really matter, such as planning and childcare, are very much in the ‘difficult and painful’ category, so no easy way out there.)
Faced with all that, MPs could be forgiven for listening to those who say the Tories should simply abandon the ‘ideological’ small-state stuff. Why not try to win the victory over ourselves? The last election suggests we’re beatable.
Sadly, that easy exit is as false as all the others. Today’s Overton Tightrope leads nowhere; the 50-year forward projections of health, social care, and pension spending point to a future where government does nothing else. We can already see this playing out, in microcosm, in local government.
Successive governments have kept social care and special education needs and development (SEND) off the Exchequer’s books by making them a statutory responsibility of local authorities, with the result that council tax has quietly morphed into effectively a social care and special needs levy as services (bin collections, firework displays, street beautification) are cut and cut again.
Now those councils are starting to go bankrupt, meaning at some point in the near future Westminster is going to have another big tranche of entitlements fall onto its plate. At which point, either the government of the day cuts SEND spending and asks wealthier old people to contribute towards their care, or they cut services. All without a tax cut in sight.
Can be blame them? If they tried the alternative, they’d be confronted both by furious lobbyists and midwit commentators brandishing polls showing that, by huge margins, the public prefer good times to bad times and more things to fewer things. We saw in 2017 what happened when a conscientious politician tried to use a position of enormous apparent strength to seek a mandate for a relatively trivial reality-adjustment; crucially, so did a generation of her peers.
Rule all that out, and you’re left with what we have now, with politics waged over an extremely narrow strip of policy territory as ministers and shadow ministers totter along the Overton Tightrope as best they can, the odd old ends of Tory and Labour philosophy serving increasingly the same role as did those of holy writ for Richard III, albeit in this case clothing impotence rather than villainy.
If that all sounds a bit miserable, it is! But if you’re aspiring to govern this country, that’s your in-tray. Labour seemed not to really have grasped that before taking office in July, but we will have no excuse for making the same mistake. Even if the Conservatives could actually regain office by just sitting back and letting Labour fail (and we can’t), the resulting government would simply be an accelerated ride through the exact same house of horrors currently unfolding around Starmer and Reeves.
So again: if you want taxes to come down, spending has to come down, and that means services and entitlements need to be cut. Accepting this is the difference between paying lip-service to the principle of lower taxation and actually holding it. In government, we chose the former; if we do the same in opposition, these will be five wasted years.